Professional Documents
Culture Documents
WORLD
INVESTMENT
REPORT 2016
Investor Nationality: Policy Challenges
note
In 2015, global flows of foreign direct investment rose by about 40 per cent, to
$1.8 trillion, the highest level since the global economic and financial crisis began
in 2008. However, this growth did not translate into an equivalent expansion in
productive capacity in all countries. This is a troubling development in light of the
investment needs associated with the newly adopted Sustainable Development
Goals and the ambitious action envisaged in the landmark Paris Agreement on
climate change. This latest World Investment Report presents an Investment
Facilitation Action Package to further enhance the enabling environment for
investment in sustainable development.
The Addis Ababa Action Agenda calls for reorienting the national and
international investment regime towards sustainable development. UNCTAD
plays an important role within the United Nations system in supporting these
endeavours. Its Investment Policy Framework and the Road Map for International
Investment Agreements Reform have been used by more than 100 countries in
reviewing their investment treaty networks and formulating a new generation of
international investment policies.
Regulations on the ownership and control of companies are essential in the
investment regime of most countries. But in an era of complex multinational
ownership structures, the rationale and effectiveness of this policy instrument
needs a comprehensive re-assessment. This Report provides insights on the
ownership structures of multinational enterprises (MNEs), and maps the global
network of corporate entities using data on millions of parents and affiliates. It
analyses national and international investment policy practices worldwide, and
proposes a new framework for handling ownership issues.
This latest edition of the World Investment Report is being issued as the world
embarks on the crucial work of implementing the landmark 2030 Agenda for
Sustainable Development and the Paris Agreement on climate change. The
key findings and policy recommendations of the Report are far reaching and
can contribute to our efforts to uphold the promise to leave no one behind and
build a world of dignity for all. I therefore commend this Report to a wide global
audience.
BAN Ki-moon
Secretary-General of the United Nations
ABBREVIATIONS
AGOA African Growth and Opportunity Act
APEC Asia-Pacific Economic Cooperation
BEPS base erosion and profit shifting
BIT bilateral investment treaty
BRICS Brazil, Russian Federation, India, China, South Africa
CETA Comprehensive Economic and Trade Agreement
CFIA Cooperative and Facilitation Investment Agreement
CFC controlled foreign company
CFTA African Continental Free Trade Agreement
CIS Commonwealth of Independent States
COMESA Common Market for Eastern and Southern Africa
CSR corporate social responsibility
DOB denial of benefits
DTT double-taxation treaty
EAC East African Community
EPA economic partnership agreement
FET fair and equitable treatment
FTA free trade agreement
GATS General Agreement on Trade in Services
GFCF gross fixed capital formation
GUO global ultimate owner
GVC global value chain
ICS Investment Court System
IIA international investment agreement
IPA investment promotion agency
IPFSD Investment Policy Framework for Sustainable Development
ISDS investor–State dispute settlement
JV joint venture
LDC least developed country
LLDC landlocked developing country
M&As mergers and acquisitions
MFN most favoured nation
MNE multinational enterprise
NAFTA North American Free Trade Agreement
OFC offshore financial centre
OIA outward investment agency
PAIC Pan-African Investment Code
RCEP Regional Comprehensive Economic Partnership
RTIA regional trade and investment agreements
SADC Southern African Development Community
SBA substantial business activities
SDGs Sustainable Development Goals
SEZ special economic zone
SIDS small island developing States
SPE special purpose entity
TIFA trade and investment framework agreement
TIP treaty with investment provision
TISA Trade in Services Agreement
TPP Trans-Pacific Partnership Agreement
TTIP Transatlantic Trade and Investment Partnership
UNCITRAL United Nations Commission on International Trade Law
WIPS World Investment Prospects Survey
WTO World Trade Organization
PREFACE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
ACKNOWLEDGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
KEY MESSAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
A. CURRENT TRENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. FDI by geography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. PROSPECTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
C. INTERNATIONAL PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
DEVELOPING ECONOMIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
1. Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
2. Developing Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4. Transition economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5. Developed countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
1. Overall trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
3. IIA reform: taking stock and charting the way forward . . . . . . . . . . . . . . 108
2. The ownership matrix and the investor nationality mismatch index. . . . . 147
REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Annex table 2. FDI stock, by region and economy, 2000, 2010 and 2015. . . 200
chaper
chaper 1-21-2
2005–2015
Developed
Developing
Transition
$962 bn
$765 bn
$35 bn
KEY MESSAGES
GLOBAL INVESTMENT TRENDS
38% 2015
Global FDI
+ Recovery in FDI was strong in 2015. Global foreign direct investment (FDI) flows jumped by
38
Global FDI 38 per cent to $1.76 trillion, their highest level since the global economic and financial crisis
$576
+$1.76 bn
% i2015
tril on of 2008–2009. A surge in cross-border mergers and acquisitions (M&As) to $721 billion,
from $432 billion in 2014, was the principal factor behind the global rebound. The value of
$1.76
Europetril ion announced greenfield investment remained at a high level, at $766 billion.
Part of the growth in FDI was due to corporate reconfigurations. These transactions often
largest
Devel investor es
oped economi
took lregi
argestoshare
n in of2015
global FDI involve large movements in the balance of payments but little change in actual operations.
Discounting these large-scale corporate reconfigurations implies a more moderate increase
Developed $962 bn
of around 15 per cent in global FDI flows.
$765 bn
DeveloDeveloping
ped economies Inward FDI flows to developed economies almost doubled to $962 billion. As a result,
took largest share of global FDI developed economies tipped the balance back in their favour with 55 per cent of global FDI,
$35 bn
2005–2015 Transition up from 41 per cent in 2014. Strong growth in inflows was reported in Europe. In the United
States FDI almost quadrupled, albeit from a historically low level in 2014.
Developed $962 bn
$765 bn Developing economies saw their FDI inflows reach a new high of $765 billion, 9 per cent
higher than in 2014. Developing Asia, with FDI inflows surpassing half a trillion dollars,
Developing
remained the largest FDI recipient region in the world. Flows to Africa and Latin America and
$35 bn the Caribbean faltered. Developing economies continue to comprise half of the top 10 host
2005–2015 Transition
economies for FDI flows.
Outward FDI flows from developed economies jumped by 33 per cent to $1.1 trillion. The
$576 bn increase notwithstanding, their outward FDI remained 40 per cent short of its 2007 peak.
With flows of $576 billion, Europe became the world’s largest investing region. FDI by MNEs
1.8 from North America stayed close to their 2014 levels.
Primary sector FDI activity decreased, manufacturing increased. A flurry of deals raised
regi
$576 bn
otonfalinl in2015
2016
but grow over medium-term
Looking ahead, FDI flows are expected to decline by 10-15 per cent in 2016, reflecting the
fragility of the global economy, persistent weakness of aggregate demand, sluggish growth
in some commodity exporting countries, effective policy measures to curb tax inversion
10-15% deals and a slump in MNE profits. Over the medium term, global FDI flows are projected to
resume growth in 2017 and to surpass $1.8 trillion in 2018, reflecting an expected pick up
Europe
in global growth.
largest investor FDI flows to Africa fell to $54 billion in 2015, a decrease of 7 per cent over the previous
year. An upturn in FDI into North Africa was more than offset by decreasing flows into Sub-
Africa
region in 2015 Saharan Africa, especially to West and Central Africa. Low commodity prices depressed
2015
x
$54 bn
World Investment Report 2016 Investor Nationality: Policy Challenges
3,304
70 New
ISDS cases
annual record
chaper 1-2
Developing Asia saw FDI inflows increase by 16 per cent to $541 billion – a new record. Record inflows to
The significant growth was driven by the strong performance of East and South Asian
economies. FDI inflows are expected to slow down in 2016 and revert to their 2014 level.
developing Asia
Outflows from the region dropped by about 17 per cent to $332 billion – the first decline
$541 bn
38% 2015
Global FDI
since 2012. +
FDI flows to Latin America and the Caribbean – excluding offshore financial centres – $1.76
+16tri%l ion
remained flat in 2015 at $168 billion. Slowing domestic demand and worsening terms of
trade caused by falling commodity prices hampered FDI mainly in South America. In contrast,
flows to Central America made gains in 2015 due to FDI in manufacturing. FDI flows to the
Developed economies
region may slow down in 2016 as challenging macroeconomic conditions persist. took largest share of global FDI
FDI flows to transition economies declined further, to levels last seen almost 10 years ago Developed $962 bn
$765 bn
owing to a combination of low commodity prices, weakening domestic markets and the Developing
impact of restrictive measures/geopolitical tensions. Outward FDI from the region also 2005–2015 Transition
$35 bn
slowed down, hindered by the reduced access to international capital markets. After the
slump of 2015, FDI flows to transition economies are expected to increase modestly.
Complex ownership:
After three successive years of contraction, FDI inflows to developed countries bounced
100 MNEs
back sharply to the highest level since 2007. Exceptionally high cross-border M&A values 500 affiliates
among developed economies were the principal factor. Announced greenfield investment 50 countri
chaper e3s
also remained high. Outward FDI from the group jumped. Barring another wave of cross-
border M&A deals and corporate reconfigurations, the recovery of FDI activity is unlikely
to be sustained in 2016 as the growth momentum in some large developed economies
$576 bn
weakened towards the end of 2015.
Inflows to
FDI flows to structurally weak and vulnerable economies as a group increased moderately by
2 per cent to $56 billion. Developing economies are now major sources of investments in all Europe
Developed
economi
of these groupings. Flows to least developed countries (LDCs) jumped by one third to $35 largest inevestor
s
billion; landlocked developing countries (LLDCs) and small island developing States (SIDS) at regi
theiornhiing2015
hest
saw a decrease in their FDI inflows of 18 per cent and 32 per cent respectively. Divergent
trends are also reflected in their FDI prospects for 2016. While LLDCs are expected to see
level since 2007
increased inflows, overall FDI prospects for LDCs and SIDS are subdued.
and promotion. In 2015, 85 per cent of measures were favourable to investors. Emerging
economies in Asia were most active in investment liberalization, across a broad range of
Liberalisation/Promotion
industries. Where new investment restrictions or regulations were introduced, these mainly
reflected concerns about foreign ownership in strategic industries. A noteworthy feature in
new measures was also the adoption or revision of investment laws, mainly in some African
countries.
National security considerations are an increasingly important factor in investment policies.
15%
Countries use different concepts of national security, allowing them to take into account key
economic interests in the investment screening process. Governments’ space for applying National investment
national security regulations needs to be balanced with investors’ need for transparent and policy measures
predictable procedures.
1.8
Key Messages xi
National investment
policy measures
The universe of international investment agreements (IIAs) continues to grow. In 2015, 31
31
new IIAs were concluded, bringing the universe to 3,304 treaties by year-end. Although
+ the annual number of new IIAs continues to decrease, some IIAs involve a large number of
parties and carry significant economic and political weight. Recent IIAs follow different treaty
in 2015
31
models and regional agreements often leave existing bilateral treaties between the parties
+ in force, increasing complexity. By the end of May 2016, close to 150 economies were
Total
in 2015 IIAs engaged in negotiating at least 57 new IIAs.
3,304
Total IIAs
With 70 cases initiated in 2015, the number of new treaty-based investor-State arbitrations
set a new annual high. Following the recent trend, a high share of cases (40 per cent) was
3,304 brought against developed countries. Publicly available arbitral decisions in 2015 had a
variety of outcomes, with States often prevailing at the jurisdictional stage of proceedings,
and investors winning more of the cases that reached the merits stage.
70
IIA reform is intensifying and yielding the first concrete results. A new generation of
70
investment treaties is emerging. UNCTAD’s Investment Policy Framework and its Road Map
NewNew
for IIA Reform are shaping key reform activities at all levels of policymaking. About 100
countries have used these policy instruments to review their IIA networks and about 60 have
ISDS
ISDS cases
cases used them to design treaty clauses. During this first phase of IIA reform, countries have built
consensus on the need for reform, identified reform areas and approaches, reviewed their
annual
annualrecord
record IIA networks, developed new model treaties and started to negotiate new, more modern IIAs.
Despite significant progress, much remains to be done. Phase two of IIA reform will require
countries to focus more on the existing stock of treaties. Unlike the first phase of IIA reform,
where most activities took place at the national level, phase two of IIA reform will require
chaper 1-2 enhanced collaboration and coordination between treaty partners to address the systemic
risks and incoherence of the large body of old treaties. The 2016 World Investment Forum
chaper 1-2 offers the opportunity to discuss how to carry IIA reform to the next phase.
Investment facilitation: a policy gap that needs to be closed. Promoting and facilitating
investment is crucial for the post-2015 development agenda. At the national level, many
countries have set up schemes to promote and facilitate investment, but most efforts relate
38% 2015
Global FDI
+ to promotion (marketing a location and providing incentives) rather than facilitation (making
it easier to invest). In IIAs, concrete facilitation measures are rare.
$1.76 tril iGlobal
on FDI
+ 38
% 2015
UNCTAD’s Global Action Menu for Investment Facilitation provides policy options to
improve transparency and information available to investors, ensure efficient and
effective administrative procedures, and enhance predictability of the policy environment,
$1.76 tril ion among others. The Action Menu consists of 10 action lines and over 40 policy options.
It includes measures that countries can implement unilaterally, and options that can guide
Developed economies international collaboration or that can be incorporated in IIAs.
took largest share of global FDI
xii $576 bn
World Investment Report 2016 Investor Nationality: Policy Challenges
of foreign affiliates:
direct & ultimate owners
have different passports
40%
The larger the MNEs, the greater is the complexity of their internal ownership structures. The
top 100 MNEs in UNCTAD’s Transnationality Index have on average more than 500 affiliates
each, across more than 50 countries. They have 7 hierarchical levels in their ownership
Record inflows to
structure (i.e. ownership links to affiliates could potentially cross 6 borders), they have about devel oping Asia
of foreign affiliates:
20 holding companies owning affiliates across multiple jurisdictions, and they have almost
70 entities in offshore investment hubs.
Rules on foreign ownership are ubiquitous: 80 per cent of countries restrict majority foreign
di rect
$541
ultimate
&
ownersbn
ownership in at least one industry. The trend in ownership-related measures is towards
liberalization, through the lifting of restrictions, increases in allowed foreign shareholdings,
or easing of approvals and admission procedures for foreign investors. However, many
+16%
have different passports
80%
Rethinking ownership-based investment policies means safeguarding the effectiveness of
ownership rules and considering alternatives. On the one hand, policymakers should test the
at their highest
“fit-for-purpose” of ownership rules compared to mechanisms in investment-related policy level since 2007
areas such as competition, tax, and industrial development. On the other, policymakers
of countries restrict
can strengthen the assessment of ownership chains and ultimate ownership and improve
disclosure requirements. However, they should be aware of the administrative burden
majority foreign
this can impose on public institutions and on investors. Overall, it is important to find a ownership in at
balance between liberalization and regulation in pursuing the ultimate objective of promoting least one industry
investment for sustainable development.
Mukhisa Kituyi
Secretary-General of the UNCTAD
GLOBAL
INVESTMENT
TRENDS
A. CURRENT TRENDS
Global FDI flows rose by 38 per cent to $1.76 trillion in 2015,1 their highest level since the
global economic and financial crisis of 2008–2009 (figure I.1). However, they still remain some
10 per cent short of the 2007 peak. A surge in cross-border mergers and acquisitions (M&As)
to $721 billion, from $432 billion in 2014, was the principal factor behind the global rebound.
These acquisitions were partly driven by corporate reconfigurations (i.e. changes in legal or
ownership structures of multinational enterprises (MNEs), including tax inversions). Discounting
these large-scale corporate reconfigurations implies a more moderate increase of about 15 per
cent in global FDI flows. The value of announced greenfield investment projects2 remained at a
high level, at $766 billion.
Looking ahead, FDI flows are expected to decline by 10–15 per cent in 2016, reflecting the
fragility of the global economy, persistent weakness of aggregate demand, effective policy
measures to curb tax inversion deals and a slump in MNE profits. Elevated geopolitical risks and
regional tensions could further amplify the expected downturn. FDI flows are likely to decline in
both developed and developing economies, barring another wave of cross-border M&A deals
and corporate reconfigurations. Over the medium term, global FDI flows are projected to resume
growth in 2017 and to surpass $1.8 trillion in 2018 (see figure I.1).
World total
Developed economies
Developing economies
Transition economies
55% 962
+84%
$1762 765
+9%
+38%
3 000
2 500
PROJECTIONS
2 000
1 500
1 000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
a. FDI inflows
FDI recovery was strong in 2015, but lacked productive impact. Global FDI flows
jumped by 38 per cent to $1,762 billion. The rise in FDI was somewhat at odds with the
global macroeconomic environment, which was dominated by slowing growth in emerging
markets and a sharp decline in commodity prices. The principal explanation for this seeming
inconsistency was a surge in cross-border M&As, especially in developed economies.
Although FDI through cross-border M&As can boost productive investments, a number of deals
concluded in 2015 can be attributed to corporate reconfiguration, including tax inversions. Such
reconfigurations often involve large movements in the balance of payments but little change in
actual MNE operations. This trend was especially apparent in the United States and Europe, but
was also noticeable in the developing world. In Hong Kong (China), a part of the sharp uptick in
inward FDI can be attributed to the restructuring of two large conglomerates (chapter II).
Discounting these deals implies, however, a more moderate increase of about 15 per cent in
global FDI flows. In 2015, announced greenfield investments reached $766 billion – an 8 per
cent rise from the previous year. The rise was more pronounced in developed economies (up
12 per cent), signalling a potential rebound in FDI in productive assets as macroeconomic and
financial conditions improve.
In this context, a concern is the apparent pullback in productive investments by MNEs. During
2015, capital expenditures by the 5,000 largest MNEs declined further (down 11 per cent) after
posting a drop in 2014 (down 5 per cent) (figure I.2).
To some extent, these trends are a reflection of the current global macroeconomic situation. A
large number of MNEs in the extractive sector, for example, reduced their capital expenditures
and have announced significant reductions in their medium-term investment plans. Likewise,
MNEs in other sectors are reviewing their capital expenditure needs and trade in light of slowing
global growth and weakening aggregate demand. In 2015, the volume of world trade in goods
and services failed to keep pace with real GDP growth, expanding just 2.6 per cent as compared
with an average rate of 7.2 per cent between 2000 and 2007, before the financial crisis.
Figure I.2. Top 5,000 MNEs: capital expenditures and acquisition outlays, 2007−2015 (Billions of dollars)
541
504 2013 2014 2015
468
431 429
323 306
283
Developing Asia Europe North America Latin America and Africa Transition
the Caribbean economies
380
United States (3) 107
Developed economies
Hong Kong, China (2) 175
114 Share in world FDI outflows
136
China (1) 129
Value Share
Netherlands (8) 73
52
1 800 80
Switzerland (38) 69
7
1 600
65 70
Singapore (5) 68
65 1 400
Brazil (4) 73 60
49 1 200
Canada (6) 59
50
44
India (10) 35
1 000
40
France (20) 43
15 800
40
United Kingdom (7) 52
30
600
Germany (98) 32
1 20
400
Belgium (189) 31
-9
200 10
Mexico (13) 30
26
25 0 0
Luxembourg (23) 12 2005 2007 2009 2011 2013 2015
22
Australia (9) 40
Developed economies Source: ©UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics).
20
Italy (14) 23 2015 2014
Chile (17) 20
21 Developing and
transition economies
17
Turkey (22) 12 2015 2014
A primary catalyst of decreasing inflows in developing and transition economies was the
continued decline in commodity prices, especially for crude oil and for metals and minerals.
The precipitous fall in oil prices that occurred in the second half of 2014 weighed heavily on
FDI flows to oil-exporting countries in Africa, South America and transition economies. FDI to
oil-producing economies was affected not only by reductions in planned capital expenditures
in response to declining prices, but also by a sharp reduction in reinvested earnings as profit
margins shrank. Economies in which mining plays a predominant role in FDI also registered
declines.
An associated factor was the relatively slow growth of emerging markets as a whole, which
dampened investment activity. Among BRICS economies, which represented roughly a third of
FDI flows to developing and transition economies, Brazil and the Russian Federation were in
recession. Growth was slow in South Africa, slowing in China and relatively stable in India. In
turn, depreciating national currencies weighed on profits when expressed in dollars, which put
downward pressure on reinvested earnings.
Figure I.7. FDI outflows by component, by group of economies, 2007–2015 (Per cent)
1 4 3 4 4 1 4
100
12 7 10 10
16 13 14 16
19 17
37
38
75 52 43 43 44
30 24 43 49
52 30
46 26 46
41
54
65
50
60 64 60
58 54 55
25 50 54 53 52
48 44 44 47
44 42
33
22
-1
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure I.8. FDI inflows in selected megagroupings, 2014 and 2015 (Billions of dollars and per cent)
Megagrouping FDI inflows Share in world FDI FDI inflows Share in world FDI Inward FDI stock
2014 2015
United Kingdom
BRICS
United States $2.4 tn
G20
The G205 members generated over three quarters of global GDP but attracted half of global
world FDI flows in 2015. Overall FDI flows to the group increased by 42 per cent in 2015, with
foreign investment increasing in most members. Yet nearly two thirds of the total inflows to the
G20 were concentrated in only three countries – the United States, China and Brazil.
Some 58 per cent of global FDI stock is invested in the G20 ($14.4 trillion) (figure I.9). The G20
member economies are home to more than 95 per cent of the Fortune Global 500 companies.
Intra-G20 investment is a significant source of FDI within the group, accounting for an annual
average of 42 per cent of inflows in 2010−2014 (figure I.10). Intra-G20 M&As in 2015 rose
by 187 per cent, from $92 billion in 2014 to $265 billion, and are contributing to stronger
intragroup investment and corporate connectivity. About half of cross-border M&A sales in
the group in 2015 are intra-G20 transactions, mainly driven by sales in the United States
(chapter II). Indeed, 18 per cent of the intra-G20 M&A sales in 2015 were in the United States;
Canada, Japan and the United Kingdom led asset acquisition within the group last year. As a
result, total M&A sales in the G20 increased by 96 per cent, to $519 billion.
Table I.1. Outward FDI stock from BRICS, 2014 (Billions of dollars)
Destination Brazil Russian Federation India China South Africa
World 186 258 88 789 144
Developed countries 155 222 39 135 66
Developing and 30 31 48 654 78
transition economies
Unspecified 1 5 - - -
Top developing and Latin America (26) Transition economies (17) ASEAN (22) East Asia (522) East Asia (47)
transition regions
West Asia (8) Africa (15) ASEAN (48) Africa (26)
ASEAN (5) West Asia (10)
Top 5 developing Argentina (6) Turkey (7) Singapore (21) Hong Kong (China) (510) China (46)
and transition
Uruguay (4) Belarus (5) United Arab Emirates (5) Singapore (21) Mozambique (2)
economies
Panama (4) Kazakhstan (3) Bahrain (5) Russian Federation (9) Zimbabwe (2)
Peru (3) Singapore (3) Russian Federation (1) Kazakhstan (8) Botswana (1)
Venezuela (3) Viet Nam (2) Colombia (1) Indonesia (7) Namibia (1)
Source: ©UNCTAD.
Note: Totals exclude the Caribbean financial centres. Offshore financial centres are significant FDI destinations for the BRICS. For instance, some $43 billion of Russian OFDI stock is
in the British Virgin Islands. About $56 billion of OFDI stock from Brazil is in the Cayman Islands and $28 billion in the British Virgin Islands.
Figure I.12. Global inward FDI stock, sectoral distribution by grouping and region, 2014 (Per cent)
World 7 27 64 2
Developed countries 6 27 65 2
Developing economies 8 27 64 2
Africa 28 20 51 2
Latin America
22 31 42 5
and the Caribbean
Developing Asia 2 26 70 2
Transition economies 15 15 70
Figure I.14. Value of cross-border M&A sales in manufacturing industries, by grouping, 2014 and 2015
(Billions of dollars)
4 3
3 4
26
28
12 3
9
47
25
2014 2015
4
44
114 20
2014 2015
6
85
140
Other industries Machinery and equipment
Pharmaceuticals Furniture
Chemicals and chemical products Food, beverages and tobacco
Non-metallic mineral products
Figure I.15. Global commodity price indices, January 2000–March 2016 (Price indices, 2000 = 100)
500
450
Crude
petroleum*
400
350
300
250
Minerals, ores
and metals
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ©UNCTAD.
* Simple average of Brent (light), Dubai (medium) and Texas (heavy).
21%
66
17%
3
12%
8%
1 35 4%
4 4
18 69
14 3 10
31 37 6
20 27 21
7
2009 2010 2011 2012 2014
-2 2015
-28
12%
33
8%
7%
6%
4% 5%
34 48 4%
83
14
19 15
16
23 21 17 28 20
11
2009 2010 2011 2012 2013 2014 2015
Source: ©UNCTAD, cross-border M&A database and information from Financial Times Ltd, fDi Markets (www.fDimarkets.com) for announced greenfield projects.
(WIR14).
The scale of the necessary resources, even allowing 28
for a significant increase in public and domestic private
investment, requires a much larger contribution by 57
100
80
60
40
20
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: ©UNCTAD, based on information from the Financial Times Ltd, fDi Markets (www.fDimarkets.com).
Note: Low-carbon business areas include alternative/renewable energy, recycling and manufacturing of environmental technology.
Figure I.20. Investment flows to and from SPEs, 2006 Q1–2015 Q4 (Billions of dollars)
400
Inflows
300
Outflows
200
100
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-100
-200
-300
Source: ©UNCTAD.
Note: SPEs include all countries that publish SPE data.
Figure I.23. United States: FDI income on outward investment, 2003 Q1–2015 Q4 (Billions of dollars)
70
60
Other companies
50
40
30
Holding companies (non-bank)
20
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: ©UNCTAD, based on data from the United States Bureau of Economic Analysis (BEA).
Global FDI flows are expected to decline by 10–15 per cent in 2016. Over the medium
term, flows are projected to resume growth in 2017 and surpass $1.8 trillion in 2018.
These expectations are based on the current forecast for a number of macroeconomic indicators
and firm level factors, the findings of UNCTAD’s survey of investment prospects of MNEs and
investment promotion agencies (IPAs), UNCTAD’s econometric forecasting model for FDI inflows
and preliminary 2016 data for cross-border M&As and announced greenfield projects.
The expected decline of FDI flows in 2016 reflects the fragility of the global economy, persistent
weakness of aggregate demand, effective policy measures to curb tax inversion deals and
a slump in MNE profits. Barring another wave of cross-border M&A deals and corporate
reconfigurations, FDI flows are likely to decline in both developed and developing economies.
Table I.3. Real growth rates of GDP and gross fixed capital formation (GFCF), 2014–2017
(Per cent)
Figure I.26. Factors influencing future global FDI activity (Per cent of all executives)
State of developing 52
Asian economies 29
Offshore outsourcing of 48
corporate operations 15
State of the EU economy 44
30
37
Energy security 26
Quantitative easing programs 38
22
33
Changes in tax regimes 29 Climate change 18
39
Natural disasters, 4
Geopolitical uncertainty 4 including pandemics 52
74
Debt concerns in 4 2
Terrorism
emerging markets 62 73
Share of executives who think this factor Share of executives who think this factor
will lead to an increase in global FDI will lead to a decrease in global FDI
All 26 25 41 8 18 20 50 12 13 18 53 16
Top MNEs 45 16 32 6 29 23 35 13 22 19 44 16
Developed countries 24 26 40 10 17 19 49 15 13 18 51 18
Developing and 35 23 42 20 20 57 3 16 16 61 6
transition economies
Primary 60 13 20 7 40 20 20 20 13 27 33 27
Manufacturing 21 27 44 7 19 14 57 10 20 13 52 15
Services 22 27 44 7 11 27 51 11 4 22 63 11
Prospective top destinations. MNEs’ three top United Arab Emirates (8) 6 Developed countries
prospective host countries – China, India and the Norway (18) 4 Developing economies
United States – remain unchanged in this year’s survey
compared with recent years, though the order has
Source: ©UNCTAD IPA survey.
changed since last year (figure I.30). However, lower
down in the ranking there has been some change. In
particular Hong Kong (China) and Singapore do not
rank in the top 14, while the Philippines and Myanmar
India (3) 19
Germany (7) 13
Japan (10) 13
Brazil (4) 11
Mexico (8) 11
Indonesia (14) 8
Malaysia (14) 5
Philippines (-) 5
France (10) 5
Australia (10) 5
International production continues to expand. Sales and value added of MNEs’ foreign
affiliates rose in 2015 by 7.4 per cent and 6.5 per cent, respectively. Employment of foreign
affiliates reached 79.5 million (table I.4). However, the return on FDI of foreign affiliates in host
economies worsened, falling from 6.7 per cent in 2014 to 6.0 per cent in 2015.
The foreign operations of the top 100 MNEs retreated in the wake of falling commodity
prices, although employment increased. Virtually all MNEs in extractive industries such
as oil, gas and mining, which make up over a fifth of the top global ranking, reduced their
operations abroad in terms of assets and sales; for instance, in the case of oil companies, lower
prices reduced sales revenues by more than 10 per cent. Moreover, a number of global factors,
including currency volatility and weaker demand, have unfavourably affected some companies’
2006 2015
Sales
Foreign 6 078 6 011 -1.1 5 115 -14.9 2 003 2 135 6.6
Domestic 3 214 3 031 -5.7 2 748 -9.3 2 167 2 160 -0.3
Total 9 292 9 042 -2.7 7 863 -13.0 4 170 4 295 3.0
Foreign as % of total 65 66 1.1c 65 -1.4c 48 50 1.7c
Employment
Foreign 9 555 9 375 -1.9 9 973 6.4 4 083 4 173 2.2
Domestic 6 906 6 441 -6.7 7 332 13.8 7 364 7 361 0.0
Total 16 461 15 816 -3.9 17 304 9.4 11 447 11 534 0.8
Foreign as % of total 58 59 1.2c 58 -1.6c 36 36 0.5c
Source: ©UNCTAD.
Note: From 2009 onwards, data refer to fiscal year results reported between 1 April of the base year and 31 March of the following year. Complete 2015 data for the 100 largest
MNEs from developing and transition economies are not yet available.
a
Revised results.
b
Preliminary results.
c
In percentage points.
Figure I.32. Labour productivity of developing- and transition-economy MNEs as a ratio to that of
developing-economy MNEs, selected industries, average 2011−2014 (Per cent)
Primary
Extractive industries 72 -7
Agriculture 42 9
Manufacturing
Computers 74 35
Automobiles 72 5
Primary metals 68 16
Electronic components 64 23
Chemicals 63 5
Electrical equipment 61 18
Metal products 60 12
Household appliances 59 -2
Instruments 58 20
Non-metal materials 56 11
Pharmaceuticals 49 1
Machinery 47 2
Services
Business services 70 42
Telecommunications 59 -2
Construction 59 13
Trade 56 22
Data processing 46 1
Utilities 44 -8
Regional
Investment
Trends
INTRODUCTION
Global foreign direct investment (FDI) inflows rose by 38 per cent overall in 2015 to
$1,762 billion, up from $1,277 billion in 2014, but with considerable variance between country
groups and regions (table II.1).
FDI flows to developed economies jumped by 84 per cent to reach their second highest
level, at $962 billion. Strong growth in flows was reported in Europe (up 65 per cent to $504
billion). In the United States FDI flows almost quadrupled, although from a historically low
level in 2014. Developing economies saw inward FDI reach a new high of $765 billion, 9
per cent above the level in 2014. Developing Asia, with inward FDI surpassing half a trillion
dollars, remained the largest FDI recipient in the world. FDI flows to Latin America and the
Caribbean – excluding Caribbean offshore financial centres – remained flat at $168 billion.
Table II.1. FDI flows, by region, 2013–2015 (Billions of dollars and per cent)
Region FDI inflows FDI outflows
2013 2014 2015 2013 2014 2015
World 1 427 1 277 1 762 1 311 1 318 1 474
Developed economies 680 522 962 826 801 1 065
Europe 323 306 504 320 311 576
North America 283 165 429 363 372 367
Developing economies 662 698 765 409 446 378
Africa 52 58 54 16 15 11
Asia 431 468 541 359 398 332
East and South-East Asia 350 383 448 312 365 293
South Asia 36 41 50 2 12 8
West Asia 46 43 42 45 20 31
Latin America and the Caribbean 176 170 168 32 31 33
Oceania 3 2 2 2 1 2
Transition economies 85 56 35 76 72 31
Structurally weak, vulnerable and small economies a 52 55 56 14 14 8
LDCs 21 26 35 8 5 3
LLDCs 30 30 24 4 7 4
SIDS 6 7 5 3 2 1
Memorandum: percentage share in world FDI flows
Developed economies 47.7 40.9 54.6 63.0 60.7 72.3
Europe 22.7 24.0 28.6 24.4 23.6 39.1
North America 19.8 12.9 24.3 27.7 28.2 24.9
Developing economies 46.4 54.7 43.4 31.2 33.8 25.6
Africa 3.7 4.6 3.1 1.2 1.2 0.8
Asia 30.2 36.6 30.7 27.4 30.2 22.5
East and South-East Asia 24.5 30.0 25.4 23.8 27.7 19.9
South Asia 2.5 3.2 2.9 0.2 0.9 0.5
West Asia 3.2 3.4 2.4 3.4 1.5 2.1
Latin America and the Caribbean 12.3 13.3 9.5 2.5 2.4 2.2
Oceania 0.2 0.2 0.1 0.2 0.1 0.1
Transition economies 5.9 4.4 2.0 5.8 5.5 2.1
Structurally weak, vulnerable and small economies a 3.6 4.3 3.2 1.1 1.1 0.5
LDCs 1.5 2.1 2.0 0.6 0.4 0.2
LLDCs 2.1 2.3 1.4 0.3 0.5 0.2
SIDS 0.4 0.6 0.3 0.2 0.1 0.1
Source: ©UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics).
Note: LDCs = least developed countries, LLDCs = landlocked developing countries, SIDS = small island developing States.
a
Without double-counting countries that are part of multiple groups.
FDI flows, top 5 host economies, 2015 (Value and change) -7.2%
Share in world
3.1%
Morocco
$3.2 bn
-11.2%
Egypt
$6.9 bn
+49.3%
Ghana
$3.2 bn
-4.9%
Flows, by range
Above $3.0 bn
Angola
$2.0 to $2.9 bn $8.7 bn
$1.0 to $1.9 bn +351.7%
$0.5 to $0.9 bn
Below $0.5 bn
Mozambique
Top 5 host economies $3.7 bn
-24.3%
Economy
$ Value of inflows
2015 % change
2014 2009
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Final boundary between the
Republic of Sudan and the Republic of South Sudan has not yet been determined. Final status of the Abyei area is not yet determined.
4.6 3.1 3.0 3.7 3.7 4.6 3.1 0.6 0.6 0.4 0.9 1.2 1.2 0.8
60 20
45 15
30 10
15 5
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
North Africa East Africa West Africa Southern Africa Central Africa Share in world total
Inflows
Dynamic investment into Egypt boosted FDI inflows to North Africa. A degree of
investor confidence appears to have returned to North Africa as FDI flows rose by 9 per cent to
$12.6 billion in 2015. Much of the growth was due to investments in Egypt, where FDI flows
increased by 49 per cent to $6.9 billion, driven mainly by the expansion of foreign affiliates in
the financial industry (CIB Bank and Citadel Capital) and pharmaceuticals (Pfizer). Egypt’s inward
FDI also benefitted from sizable investments in telecommunications, such as the purchase of
Mobile Towers Services by Eaton Towers (United Kingdom) and continuing investment in the
gas industry by Eni (Italy). FDI flows to Morocco remained sizable at $3.2 billion in 2015. The
country continues to serve as a major manufacturing base for foreign investors in Africa: in
2015 it attracted large amounts of FDI in the automotive industry, especially from France.
Real estate developments in the country also attracted FDI from West Asia. FDI flows to Sudan
increased by 39 per cent to $1.7 billion, thanks to continued investment from Chinese oil major
CNPC.
Weak commodity prices weighed on FDI to Sub-Saharan Africa. In contrast to North
Africa, FDI inflows to West Africa declined by 18 per cent to $9.9 billion, largely because of
a slump in investment to Nigeria, the largest economy in the continent. Weighed down by
lower commodity prices, a faltering local currency and some delays in major projects (such as
Royal Dutch Shell’s multibillion-dollar offshore oil operations), FDI flows to the country fell from
$4.7 billion in 2014 to $3.1 billion in 2015. Yet despite bleak economic conditions, consumer
spending remained strong, which attracted FDI inflows. The German pharmaceutical company
Merck, for example, opened its first office in Nigeria as part of a broader African expansion.
Outside Nigeria, high cocoa prices drove FDI inflows to the region’s major exporters, such as
Ghana and Côte d’Ivoire. French chocolatier Cémoi established its first chocolate processing
factory in Côte d’Ivoire.
FDI flows to Central Africa fell by 36 per cent to $5.8 billion, as flows to the two commodity-
rich countries declined significantly. In the Congo, flows dropped to $1.5 billion after the
unusually high $5.5 billion value recorded in 2014. In the Democratic Republic of the Congo,
flows declined by 9 per cent to $1.7 billion, and large investors such as Glencore (Switzerland)
suspended their operations.
East Africa received $7.8 billion in FDI in 2015 – a 2 per cent decrease from 2014. Textile and
garments firms from Bangladesh, China and Turkey seeking alternative production bases for
export to the European Union (EU) and North America invested $2.2 billion in Ethiopia last year,
especially because of its privileged exports under the African Growth and Opportunity Act (AGOA)
and economic partnership agreements (EPAs) (chapter III). Shaoxing Mina Textile (China), for
example, announced the establishment of a textile and garment factory there to supply African
and international markets. FDI flows to Kenya reached a record level of $1.4 billion in 2015,
resulting from renewed investor interest and confidence in the country’s business climate and
booming domestic consumer market. Kenya is becoming a favoured business hub, not only
for oil and gas exploration but also for manufacturing exports, as well as consumer goods and
services. For instance, the upmarket hotel group Carlson Rezidor (United States) expanded its
Outflows
FDI outflows from Africa fell by 25 per cent to $11.3 billion. Investors from South Africa,
Nigeria and Angola reduced their investment abroad largely because of lower commodity prices,
weaker demand from main trading partners and depreciating national currencies. South Africa,
which continues to be the continent’s largest investor, reduced its FDI outflows by 30 per cent
to $5.3 billion. Similarly, investors from Angola reduced their investment abroad by 56 per cent
to $1.9 billion, down from $4.3 billion in 2014. In both countries, there was a marked decline in
Prospects
FDI inflows to Africa could return to a growth path in 2016, increasing by an average
of 6 per cent to $55–60 billion. This bounce-back is already becoming visible in announced
greenfield projects in Africa. In the first quarter of 2016, their value was $29 billion, 25 per
cent higher than the same period in 2015. The biggest rise in prospective investments are
in North African economies such as Egypt and Morocco, but a more optimistic scenario also
prevails more widely, for example in Mozambique, Ethiopia, Rwanda and the United Republic
of Tanzania.
Depressed conditions in oil and gas and in mining continue to weigh significantly on GDP growth
and investment across Africa. The rise in FDI inflows, judging by 2015 announcements, will mostly
occur in services (electricity, gas and water, construction, and transport primarily), followed by
manufacturing industries, such as food and beverages and motor vehicles (table C). MNEs are
indeed showing great interest in the African auto industry, with announced greenfield capital
expenditure into the industry amounting to $3.1 billion in 2015. Investment into Africa’s auto
industry is driven by industrial policies in countries such as Morocco, growing urban consumer
markets, improved infrastructure, and favourable trade agreements. Major automotive firms are
expected to continue to expand into Africa: PSA Peugeot-Citroen and Renault (France) and Ford
(United States) have all announced investments in Morocco; Volkswagen and BMW (Germany)
in South Africa; Honda (Japan) in Nigeria; Toyota (Japan) in Kenya; and Nissan (Japan) in Egypt.
To reduce the vulnerability of Africa to commodity price developments, countries are reviewing
policies to support FDI into the manufacturing sector. East Africa has already become more
attractive in this sector as a source and investment location, especially in light manufacturing.
MNEs are therefore investing across Africa for market-seeking and efficiency-seeking reasons.
Proximity can be beneficial, so Bahrain, France, Italy, the United Arab Emirates and the United
Kingdom remain prominent as investors (table D); but closeness to major markets in Europe
and West Asia is also attracting export-oriented investors from East, South and South-East Asia,
which are focusing on locations in North and East Africa such as Ethiopia.
Liberalization of investment regimes and privatization of State-owned commodity assets should
also provide a boost to inflows. In Algeria, for example, Sonatrach SPA, the State-owned oil and
gas company, intends to sell its interest in 20 oil and gas fields located in the country. Similarly
in Zambia, the Government is bundling State-owned businesses into a holding company and
trying to attract foreign buyers.
Other liberalization measures include the removal of further restrictions on foreign investments
in most African countries (chapter III). Kenya has moved to abolish restrictions on foreign
shareholding in listed companies as competition for capital heats up among Africa’s top capital
markets. The move comes just a year after the United Republic of Tanzania lifted a 60 per cent
restriction on foreign ownership of listed companies, permitting full foreign control.
540.7 bn
DEVELOPING ASIA 2015 Increase
FDI flows, top 5 host economies, 2015 (Value and change) +15.6%
Share in world
30.7%
Turkey
$16.5 bn
+36.0%
China
$135.6 bn
+5.5%
India
$44.2 bn
+27.8%
Singapore
$65.3 bn
-4.7%
Flows, by range
Above $50 bn
$10 to $49 bn
Top 5 host economies Figure A. Top 10 investor economies,
$1.0 to $9.9 bn
by FDI stock, 2009 and 2014 (Billions of dollars)
Economy
$0.1 to $0.9 bn $ Value of inflows 819
Hong Kong, China
2015 % change 431
Below $0.1 bn
China 513
371
430
United States 302
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Dotted line represents
approximately the Line of Control in Jammu and Kashmir agreed upon by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties.
• Developing Asia remains the world’s largest FDI recipient
HIGHLIGHTS • Outflows declined, but remain at their third highest level ever
• FDI inflows are expected to fall in 2016
27.5 29.7 27.2 27.1 30.2 36.6 30.7 20.2 20.9 20.5 23.1 27.4 30.2 22.5
600 400
400
200
200
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
East Asia South-East Asia South Asia West Asia Share in world total
Inflows
Developing Asia is the largest recipient region of FDI
Developing Asia: FDI inflows,
inflows in the world, but a major part of FDI inflows are Figure II.1. top 10 host economies, 2015
in relatively high-income and/or large economies in the (Billions of dollars)
region. In 2015, the four largest recipients – namely
Hong Kong (China), China, Singapore and India –
received more than three quarters of total inflows to Hong Kong, China 175
developing Asia. However, inward FDI into other Asian China 136
economies is not small compared with the levels Singapore 65
prevailing in other developing and transition regions,
India 44
with countries such as Turkey, Indonesia and Viet Nam
Turkey 17
also receiving significant levels of FDI (figure II.1).
Indonesia 16
East Asia: huge inflows into Hong Kong (China)
and China drove up FDI. Total inflows to the subregion Viet Nam 12
rose by 25 per cent to $322 billion (figure II.2). Malaysia 11
With $175 billion in inflows in 2015, a 53 per cent United Arab Emirates 11
increase over 2014, Hong Kong (China) became the
Thailand 11
second largest FDI recipient in the world after the
United States. This increase was mainly due to a rise
Source: ©UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics).
in equity investment, which resulted in part from a
major corporate restructuring involving Cheung Kong
Holdings and Hutchison Whampoa, under the control
of the Li family (box II.1). Developing Asia: FDI inflows,
In China, inflows rose by 6 per cent to $136 billion and Figure II.2. by subregion, 2014 and 2015
(Billions of dollars)
continued to shift towards services, which accounted for
a new record of 61 per cent of FDI. Inflows to the sector
expanded by 17 per cent, while FDI into manufacturing 322 2014 2015
stagnated, resulting in its share of FDI flows dropping
to 31 per cent. Rising wages and production costs, 258
Through a sweeping restructuring in 2015, the conglomerate under the control of Li Ka-shing and his family has reshuffled its main
businesses and switched its base of incorporation from Hong Kong (China) to the Cayman Islands. The restructuring involved previous
Cheung Kong Holdings and Hutchison Whampoa, the two flagship companies, which had a total market capitalization of HK$660 billion.
According to the restructuring plan, all real estate businesses of the two companies were injected into a new entity, Cheung Kong
Property Holdings, to be listed separately in the Hong Kong Stock Exchange. All other businesses, including energy, ports, retail and
telecommunications, were put into the newly formed CK Hutchison Holdings (CKH Holdings), incorporated in the Cayman Islands
(box figure II.1.1).
Before After
Cheung Kong restructuring restructuring
Holdings
Hutchison
Whampoa Cheung Kong
CKH Holdings
Property
A number of M&A transactions were involved in this process. For instance, Cheung Kong Holdings paid $24 billion in stock to buy
out Hutchison Whampoa and spun off its property assets. Investors had to swap their shares in Cheung Kong Holdings for stakes in
CKH Holdings.
Through this reconfiguration, the “layered holding structure” has been removed. More important, the conglomerate has been separated into
a property business in Hong Kong (China) and a diversified business with a growing portfolio of assets located in more than 50 countries. As
both companies became incorporated in the Cayman Islands, this restructuring led to a significant increase in FDI inflows into Hong Kong
(China) in statistical terms in 2015.
Source: ©UNCTAD.
the automotive industry, in which MNEs continue to invest heavily, as the Chinese car market –
already the largest in the world – becomes increasingly central to their global strategy. In this
industry, foreign automakers’ investments are increasingly targeting populous inland regions.2
FDI inflows to the Republic of Korea, another major recipient, declined by 46 per cent to $5 billion,
due to a major divestment by Tesco (United Kingdom). To consolidate its global operation and focus
more on the home market, the foreign supermarket chain sold its Korean affiliate to a group of
investors led by the local private equity firm MBK Partners for $6 billion in August 2015.3
South-East Asia: FDI to low-income economies soared but was offset by the
lacklustre performance of higher-income countries. FDI inflows to South-East
Asia (10 ASEAN member States and Timor-Leste) increased slightly, by 1 per cent, to
$126 billion in 2015. Inflows to Singapore, the leading recipient country in ASEAN,
China has become one of the largest investing countries in some developed countries. This position was further consolidated as Chinese
companies undertook a number of megadeals in 2015 and early 2016:
• Haier’s acquisition of GE Appliances (United States). The largest home appliance maker in China, privately owned Haier
generated $30 billion in global revenues in 2015. The company has been active in the United States for 18 years, but its sales there stood at
$500 million, only 2 per cent of the market. To enlarge its market share in the United States, Haier acquired GE Appliances – which generated
$6 billion in revenues in 2014 – for $5.4 billion. This was significantly higher than the price offered by Electrolux (Sweden) in 2014.
• Wanda’s purchases in the United States. Privately owned Wanda Group has undertaken a series of large acquisitions in the
entertainment industry in the United States. After the purchase of AMC Theaters for $2.6 billion in 2012, Wanda acquired Legendary
Entertainment for $3.5 billion in January 2016. Two months later, the newly acquired AMC announced that it would buy Carmike Cinemas
for $1.1 billion, further strengthening Wanda’s market position in the United States.
• ChemChina’s purchases in Europe. Chinese companies have become more and more active in Europe as well. For instance,
ChemChina bought into Pirelli PECI.MI (Italy) in a €7 billion transaction in late 2015. The State-owned company also agreed a deal to buy
Syngenta (Switzerland) for $44 billion in February 2016.
• COSCO’s deal for Piraeus Port. In 2016, shipping company COSCO bought a stake in Piraeus Port, the largest harbour in Greece. Under
the agreement, COSCO will acquire 67 per cent of the listed Piraeus Port Authority, invest €350 million over the next decade and pay an
annual fee to the Greek Government to run the port.
Source: ©UNCTAD.
In addition to major destinations such as China, Indonesia, Malaysia and Thailand, Singaporean
investors increasingly targetted lower-income countries: between April 2015 and March 2016,
approved FDI projects by Singaporean investors in Myanmar amounted to more than $4.3 billion.
Thailand’s outward investment soared by 76 per cent to $8 billion, driven by large greenfield
investments in infrastructure and industrial zones in neighbouring countries. Announcements
of planned investments suggest this trend is likely to continue. Large cross-border M&As also
contributed to the growth.
South Asia: after a boom in 2014, FDI outflows declined sharply. Outward FDI from India,
the dominant investor in the subregion, dropped by more than one third to $7.5 billion – which
resulted in an overall 36 per cent decline of outflows from South Asia to $8 billion. The decline
in commodity prices and problems of overcapacity in industries such as steel have negatively
affected some of the largest Indian conglomerates’ motivation and ability to invest abroad.
FDI outflows from Bangladesh rose slightly to $46 million, while those from the Islamic Republic
of Iran jumped from $89 million in 2014 to $139 million in 2015. For the latter country, the end
of sanctions means access to more than $50 billion in frozen assets and rising oil incomes,
which could help boost outward FDI.
West Asia: outward FDI resumed an upward trend. Outflows from West Asia soared
by 54 per cent to $31 billion, mainly due to the turnaround by Kuwait, a major investor in
the subregion. Outflows from the United Arab Emirates rose by 3 per cent to $9.3 billion,
while those from Saudi Arabia increased by 2 per cent, remaining above $5 billion. Regional
tensions may have hampered outward FDI flows from Turkish MNEs, which fell by 28 per cent to
$4.8 billion.
1.2
2.1
2.4
0.8 3.6
4.1
Electrical and electronic equipment
5.9
Metals and metal products
2014 2015 Motor vehicles and other transport equipment
Other manufacturing
3.8
Machinery and equipment
Coke, petroleum products and nuclear fuel
1.2 13.5
1.1
Source: ©UNCTAD, based on information from Financial Times Ltd, fDi Markets (www.fDimarkets.com).
167.6 bn
LATIN AMERICA 2015 Decrease
Mexico
$30.3 bn
+18.0%
Colombia
$12.1 bn
-25.8%
Brazil
$64.6 bn
-11.5%
Flows, by range
Above $10 bn
$5.0 to $9.9 bn
Chile
$1 to $4.9 bn
$20.2 bn
$0.1 to $0.9 bn -5.0%
Below $0.1 bn
Argentina
$11.7 bn
+130.1%
Top 5 host economies
Economy
$ Value of inflows
2015 % change
39
Colombia $4.2 +8.2% United Kingdom 54 Netherlands 24
45
Brazil $3.1 +37.7% 52 37
Belgium Germany 28
11
Argentina $1.1 -40.7%
2014 2009
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.
• FDI flows to South America dipped as its terms of trade further weakened
HIGHLIGHTS • Manufacturing FDI made gains in Central America
• Flows set to decline in 2016
7.1 12.0 12.3 12.6 12.3 13.3 9.5 1.1 4.1 3.1 3.2 2.5 2.4 2.2
200 70
150
100 35
50
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
Central America South America Caribbean, excluding financial centres Share in world total
Inflows
FDI to Latin America and the Caribbean – excluding the Caribbean offshore financial centres –
stayed flat in 2015 at $168 billion.
FDI flows to Central America made gains in 2015, rising 14 per cent to $42 billion,
mainly into manufacturing. Strong flows to Mexico (up 18 per cent to $30 billion) were the
principal motor of FDI growth in Central America. FDI in automotive manufacturing continued
to rise (up 31 per cent to $6 billion), reflecting the realization of at least some of the $26 billion
in greenfield projects announced between 2012 and 2014. Cross-border M&A sales in the
country rose significantly on the back of the completion of a number of megadeals, including
the purchase of Grupo Lusacell SA de CV, a wireless telecommunications provider, by AT&T
(United States) for $2.5 billion and the acquisition of Vitro SAB de CV, a glass and plastic bottling
manufacturer, by Owens-Illinois Inc. (United States) for $2 billion. FDI flows in mining in Mexico
retreated, falling from $2 billion to a net divestment of $29 million in 2015, reflecting the
continued decline in minerals and metals prices (chapter I), as well as the sector’s adjustment
to a new fiscal framework that took effect at the beginning of the year.
Although FDI flows held steady or dipped slightly in other Central American countries, manufacturing
investment proved to be resilient across the subregion, bolstered by continued growth in the United
States, the primary trade partner. In El Salvador, despite a sharp decline in FDI in the information
and communications industries, FDI flows rose by 38 per cent as FDI in manufacturing tripled. In
Guatemala, in contrast, slowing FDI in the primary sector and a slump in FDI in retail and wholesale
trade were largely responsible for the decline in inflows (down 13 per cent). Flows to Honduras
rose moderately (up 5 per cent), with lower FDI across a number of sectors being offset by an
increase in maquila-related manufacturing and a near doubling in financial and business services.
Elsewhere in Central America, FDI flows to Costa Rica rose slightly (by 4 per cent) as an increase
in FDI in manufacturing and agriculture (from $64 million in 2014 to $467 million) was offset by
a sharp reduction in FDI in real estate, which had accounted for more than a quarter of inflows
in 2014. In Panama, rising reinvested earnings and greater inflows of intracompany loans to
non-financial enterprises supported a 17 per cent increase in FDI inflows.
South America saw its FDI flows fall by 6 per cent to $121 billion, reflecting slowing
domestic demand and worsening terms of trade caused by plummeting commodity
prices. Investment in the region’s extractive sector tapered in line with the deterioration of the
prices of the region’s principal commodities exports. To some extent, this reflected a slowdown
in project execution, especially as MNEs in the sector grappled with the high levels of debt
they had taken on during the boom years. However, FDI flows into the sector – and in South
America more generally – were strongly affected by a decline in reinvested earnings, reflecting
the impact of lower prices on profit margins. Governments in the region have taken a number
of measures to bolster production and investment, reflecting the importance of the sector as a
source of investment, foreign exchange and public revenues (box II.3).
Box II.3. Investment promotion efforts for the extractive industry in South America
In an effort to boost production, South American governments actively stepped up their FDI attraction and retention efforts in the extractive
sector during 2015. At the end of 2014, the Government of Argentina had revised tax rates for hydrocarbons exports again, adopting a new
sliding scale for certain products, including crude oil, to bolster the competitiveness of domestic producers. Under the new system, exporters
pay a tax rate of only 1 per cent when the price of Brent crude is below $79, compared with rates of up to 13 per cent under the regime
adopted earlier in 2014. In February 2015, the Government announced the creation of the Crude Oil Production Stimulus Program (Programa
de Estimulo a la Producción de Petróleo Crudo), through which it was set to pay production and export subsidies, up to $6 per barrel, during
the 2015 calendar year.
In October, the Government of Ecuador presented a portfolio of 25 new mining exploration areas, as well as 17 oil blocks, as part of an
effort to attract greater investment, especially foreign investment, in exploration and production during the 2016–2020 period. In December,
the Government of the Plurinational State of Bolivia enacted a law for the promotion of investment in the exploration and exploitation of
hydrocarbons (Ley de Promoción para Inversión en Exploración y Explotación Hidrocarburífera). The law stipulates that a portion of the
revenues generated from the Direct Hydrocarbons Tax (IDH) will be deposited in a fund to finance production incentives meant to promote
greater investment, and increase the country’s reserves and output of hydrocarbons.
Some of these efforts have already generated substantial FDI commitments. In Argentina, for example, Chevron Corporation (United States)
and Petronas (Malaysia) have initiated projects – both with FDI in excess of $1 billion over the lifetime of the projects – to further explore oil
and shale gas in the country’s Vaca Muerta formation. Total (France) and BG Gas (United Kingdom) have also announced plans to invest $1.1
billion to expand exploration and production of natural gas in the Plurinational State of Bolivia in the coming years.
Source: ©UNCTAD.
Outflows
Decelerating economic growth and depreciating currencies strongly affected the
composition of outward FDI flows from the region. During the past decade, the region’s
MNEs internationalized significantly, in many cases thanks to cheap financing in United States
dollars. Debt issuance by companies from Brazil, Chile, Colombia, Mexico and Peru jumped
between 2007 and 2014 (IMF, 2015b). As regional economic growth slows and national
currencies tumble relative to the dollar, debt repayments are now beginning to rise, often at the
expense of capital expenditures and acquisitions. New equity investments – which encompass
M&As as well as the establishment of new affiliates and projects – evaporated throughout the
year, falling from $10 billion in the first quarter to just $2 billion in the last quarter of the year.
Likewise, the value of cross-border M&As carried out by the region’s MNEs fell 37 per cent in
value to $5 billion, its lowest level since 2008.
Despite this difficult context, FDI outflows from the region rose 5 per cent to $33 billion in 2015,
driven principally by changes in debt flows. In Brazil outward FDI rose a surprisingly strong 38
per cent, despite a marked decline in equity investment. This increase predominantly reflected
a significant reduction in reverse investment by Brazilian foreign affiliates. In recent years,
these subsidiaries raised significant debt in international markets and funnelled the proceeds
to their Brazilian parents through intracompany loans (Central Bank of Brazil, 2015). These
transactions, which subtract from outflows when calculated on a directional basis, totalled $24
billion in 2014, before falling to $11 billion in 2015. Given their magnitude, these flows have
strongly affected the region’s overall trends in outward FDI.
In Chile, outflows rose 31 per cent to $16 billion, due entirely to a large increase in the provision
of intracompany loans to foreign affiliates; equity investment and reinvested earnings both fell
sharply. Chilean MNEs, especially in retail, had rapidly expanded their operations in Argentina
and Brazil in recent years, where the deterioration in economic and financial conditions has
weighed heavily on the operations of affiliates. For example, Cencosud (Chile) loaned $350
million to its subsidiary in Brazil, where interest rates are increasing, so that the latter could pay
off its domestic debts. Intracompany loans were also boosted by a strong pass-through effect
in the third quarter of the year, when debt inflows spiked to $7.7 billion and debt outflows to
$9.4 billion.
Prospects
UNCTAD forecasts that FDI inflows in Latin America and the Caribbean could decline
by 10 per cent in 2016, falling to $140–160 billion. Macroeconomic conditions will remain
challenging, with the region projected to slip further into recession in 2016 (IMF, 2016). Weak
domestic demand led by softening private consumption, coupled with the potential for further
35 bn
TRANSITION ECONOMIES 2015 Decrease
FDI flows, top 5 host economies, 2015 (Value and change) -38%
Share in world
2%
Russian Federation
$9.8 bn
-66.3%
Ukraine
$3.0 bn
+622.2%
Kazakhstan
$4.0 bn
Azerbaijan
-52.2%
$4.0 bn
-8.6%
Turkmenistan
$4.3 bn
+2.1%
France 25
17
Outflows: top 5 home economies
Russian Federation 24
(Billions of dollars, and 2015 growth) 14
United Kingdom 22
14
Russian Fed. $26.6 -58.6%
22
Germany
Azerbaijan $3.3 +0.9% 25
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.
5.2 4.6 5.1 4.3 5.9 4.4 2.0 3.5 3.6 3.6 2.5 5.8 5.5 2.1
100 80
75 60
50 40
25 20
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
Inflows
Reduced investment in the Russian Federation and Kazakhstan resulted in the lowest
levels of FDI in transition economies in almost a decade. In 2015, FDI flows to transition
economies fell by 38 per cent to $35 billion. The FDI performance of transition subgroups
differed: in South-East Europe, FDI inflows increased by 6 per cent to $4.8 billion, as better
macroeconomic situations and the EU accession process continued to improve investors’ risk
perception. In contrast, FDI flows to the CIS and Georgia declined by 42 per cent to $30 billion.
The Russian Federation and Kazakhstan saw their FDI flows more than halve from their 2014
level, while flows to Belarus declined slightly. FDI to Ukraine, by contrast, increased more than
seven times, to $3 billion.
The Russian Federation recorded FDI flows of $9.8 billion, a 66 per cent contraction from the
previous year. FDI flows were mainly in the form of reinvested earnings, as new FDI flows almost
dried up (figure II.6). Falling oil prices and geopolitical tensions continued to damage economic
Figure II.6. Russian Federation: FDI inflows, total and by component, 2006–2015
(Billions of dollars)
Inflow
76
Equity
7 Reinvested earnings
Other capital
55 53
5 33
11
37 37
22 32
30 29
8 28 6
3 22
5 7 6
15
19 21 10
35
15
27 24
20 22
15
8 10 10 11
1
-0.7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -0.4
In 2015, ConocoPhillips (United States), one of the pioneers of foreign investment in the Russian oil and gas industry, completed a full
divestment from the country by selling its share of the Polar Lights joint venture with Rosneft. Conoco’s decision to leave the Russian
Federation after more than 25 years highlights the challenges facing foreign investors in the country’s energy sector, which has been hit by
political tensions and a fall in oil prices.
Conoco’s withdrawal was also the result of a string of disappointing investments in the country and a change of the company’s strategic
focus toward developed countries, and North America in particular. Before its merger with Phillips, Conoco was one of the earliest Western oil
groups to invest in the Russian Federation, having started negotiations before the collapse of the Soviet Union. Its Polar Lights joint venture,
registered in 1992, made it the largest foreign investor in the Russian energy sector in the early 1990s. In 2004, the company increased
its commitment in the country, taking an 8 per cent stake in Lukoil, one of the country’s largest oil producers, which it later raised to 20 per
cent. However, the investment failed to give Conoco the access to the vast Russian oil and gas reserves that it had hoped for, and by 2011,
it had sold off its stake. It also retreated from other parts of the region, selling a 30 per cent stake in a joint venture with Lukoil in 2012 and
its stake in Kazakhstan’s Kashagan field in 2013.
Source: ©UNCTAD, based on “Conoco quits Russia after 25 years”, Financial Times, 22 December 2015.
Investors Recipients
92 96
Cyprus 183 153 Cyprus
36 38 British Virgin
Netherlands 49 74 Islands
21 37
Bahamas 32 45 Netherlands
14 22
Germany 19 26 Austria
14 17
Bermuda 30 12
Switzerland
13 11
Luxembourg 13 10
Germany
10 8 United
France 14 8 Kingdom
British Virgin 10 6
19 Spain
Islands 5
9 6
Switzerland 6 21 United States
8 6
Ireland 5 2015 2013 5
Turkey
However, some foreign investors continued to invest in the primary sector in CIS economies. For
example, Gaetano Ltd. (United Kingdom), a private equity firm, acquired Kumi Oil OOO in the
Russian Federation, and the Malaysian State-owned Petronas acquired a 15.5 per cent stake
in Azerbaijan Gas Supply Co. for $2.25 billion. A Kazakh-Chinese investment fund was also
established in 2015 with the participation of the China-Eurasia Economic Cooperation Fund (50
per cent) and Kazakhstan’s National Holding Baiterek (50 per cent). The Fund, which has an initial
capital of $500 million, will invest in Kazakhstan’s economy to finance investments in industries
such as steel, non-ferrous metals, sheet glass, oil refining, hydropower and automobiles.
FDI in the CIS also declined drastically in some manufacturing activities, such as automotive
production. In the past decade, the increase of FDI inflows in the transition economies’
automotive industries was fuelled by foreign manufacturers’ search for low-cost, high-skilled
labour and access to a growing market. An industrial assembly policy allowing zero customs
duties on a long list of auto parts also encouraged many key players in the international car-
manufacturing market to open production facilities in transition economies. In 2015, for the first
time since 2000, the share of cars produced by foreign companies in the Russian Federation
declined by four percentage points from the preceding year (from 75 per cent to 71 per cent).
Much of this drop was due to the closure of the General Motors (United States) factory in
Saint Petersburg, but the one-quarter contraction of the Niva SUV output also played a part. In
contrast, Ford (United States) opened a new $275 million engine plant in Yelabuga to supply its
Ford Sollers joint venture and its own plant in the Saint Petersburg region.
In South-East Europe, the rise of FDI flows was mainly driven by European investors,
although the presence of investors from the South is growing. FDI flows in the subregion
Outflows
MNEs from transition economies more than halved their investment abroad.
Sanctions, sharp currency depreciation and constraints in the capital markets reduced
outward FDI to $31 billion in 2015. As in previous years, Russian MNEs accounted for most of
the region’s outflows, followed by MNEs from Azerbaijan. Flows from the Russian Federation
slumped to $27 billion in 2015, a value last recorded in 2005. Similar to inflows, investments
to Cyprus, the largest destination for Russian FDI, contracted sharply ($6.6 billion in 2015,
compared with $23 billion in 2014). Investments from Russian MNEs also decreased in
major developed countries such as the United States, the United Kingdom, Germany and the
Netherlands. However, significant acquisitions still took place in 2015: Sacturino Ltd (Russian
Federation), for example, acquired the remaining shares of Polyus Gold International Ltd
(United Kingdom) for $1 billion.
Prospects
After the slump in 2015, FDI flows to transition economies are expected to increase
in the range of $37–47 billion in 2016, barring any further escalation of geopolitical
conflicts in the region. In South-East Europe, the EU integration process and increasing
regional cooperation will likely support FDI inflows. In the CIS, FDI is expected to increase,
as some companies with hefty debt burdens and reduced access to the international capital
market are forced to sell equity stakes; for example, Rosneft, the largest Russian oil producer,
decided to sell 29.9 per cent of its Taas-Yuriakh subsidiary, which operates one of the largest
oil and gas fields in eastern Siberia, to a consortium of three Indian companies: Oil India,
Indian Oil and Bharat PetroResources. Furthermore, several countries, including Kazakhstan,
the Russian Federation and Uzbekistan, have announced large privatization plans in response
to ballooning current account deficits and depleted foreign exchange reserves, resulting from
the depreciation of their currencies and low energy prices (box II.5).
Greenfield investments announced in 2015 support projections of a moderate FDI rebound
over the next few years. Investment projects in the primary sector and related manufacturing
industries, and in construction, as well as in food, beverages and tobacco, supported a 41 per
cent increase compared with 2014, compensating the decline in the automotive industry
(table C). Investors from developing countries, particularly from the United Arab Emirates and
Viet Nam, were responsible for the increasing value in greenfield investment in 2015, overtaking
developed-country investors (table D). For example, the TH Group, one of Viet Nam’s leading
milk suppliers, is expected to invest $2.7 billion in a cow breeding and dairy processing facility
in Moscow.
Prospects for outward FDI will depend on the ability of Russian MNEs to improve their financial
standing. The value of greenfield projects announced by MNEs from transition economies
almost tripled in 2015, largely driven by energy-related manufacturing and to a lesser extent
by services (see table C). Most of this investment is directed at developing and transition
economies (see table D).
The deepening economic crisis has galvanized policymakers to revive or accelerate privatization plans in some CIS countries.
At the end of 2015, the Government of Kazakhstan announced the largest privatization of State-owned companies since the country
became independent in 1991. Large industrial companies including the oil and gas group KazMunaiGas (KMG), Kazakhtelecom (the main
telecommunication operator), Kazakhstan Temir Zholy (the national railway), Kazatomprom (the nuclear holding company) and Samruk Energy
(an energy business), are set to sell equity stakes to foreign investors ahead of planned stock market listings. With State assets accounting
for 40 per cent of Kazakhstan’s GDP, privatization is expected to attract foreign investment. Also included among 60 companies planned
for privatization are the Government’s 40 per cent stake in Eurasian Resources Group (the miner formerly known as ENRC), Air Astana (the
flag carrier part-owned by BAE), Astana airport, the Caspian Sea port of Aktau and smaller groups such as a sanatorium in Almaty and the
operator of an international free trade zone by the Chinese border.
In November 2015, Uzbekistan also announced plans to privatize 68 large companies – including Kizilkumcement, the country’s biggest
cement maker, chemical producer Ferganaazot and electronics plant Foton – to attract strategic investors who can bring new technology and
capital equipment, and introduce modern production methods and competitive products. Initially, foreign investors will be able to buy only
minority stakes, which will nonetheless give them priority rights to buy out the firms completely in the future.
In the same vein, the Russian Government announced in 2016 new privatization measures of significant State-owned companies, including
50 per cent of the oil firm Bashneft, as well as a 10.9 per cent stake in both the diamond miner Alrosa and VTB bank.
Source: ©UNCTAD.
962.5 bn
DEVELOPED COUNTRIES 2015 Increase
FDI flows, top 5 host economies, 2015 (Value and change) +84.4%
Share in world
54.6%
Ireland
$100.5 bn
+222.9%
Canada
$48.6 bn
-16.9%
Netherlands
$72.6 bn
United States +39.2%
$379.9 bn
+256.3%
Switzerland
$68.8 bn
+937.5%
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.
55.4 50.4 52.2 52.1 47.7 40.9 54.6 74.7 70.7 72.4 70.1 63.0 60.7 72.3
1 200 1 200
900
800
600
400
300
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
North America Other developed countries European Union Other developed Europe Share in world total
Inflows
Cross-border M&As drive an FDI rebound in Europe. Regaining much of the ground lost
during the three preceding years, inflows to Europe rose to $504 billion, accounting for 29 per
cent of global inflows. This rebound was driven by large increases in a relatively few countries
such as Ireland (a threefold increase) and Switzerland (a 10-fold increase), which more than
offset declining inflows in 19 economies. These two economies and the Netherlands became
the three largest recipients in Europe. Other major recipients were France and Germany, both
of which recovered sharply from the low points in 2014. Inflows into the United Kingdom – the
largest recipient in 2014 – fell back to $40 billion but remained among the largest in Europe.
Cross-border M&A sales in Europe rose to $295 billion, the highest level since 2007. Reflecting
the overall FDI pattern in Europe, these sales were largely concentrated in a few countries
and declined in the majority of European countries. In the two largest target countries in
2014, the United Kingdom and France, cross-border M&A sales increased substantially
(to $71 billion in the United Kingdom and $44 billion in France). Nevertheless, Ireland became
the second-largest target country in 2015 with $48 billion. In sectoral terms, cross-border
M&A sales in manufacturing more than doubled, to $166 billion. Corporate inversion deals
played a key part in this increase, but assets in a range of industries in France, Switzerland and
the United Kingdom also became major acquisition targets. Corporate strategy to restructure
asset profiles motivated many of those transactions (chapter I). In Europe’s services sector,
cross-border M&A sales declined by 16 per cent to $115 billion, due primarily to a $30 billion
fall in telecommunications. MNEs from developed countries were the main acquirers of assets
in Europe, with Europe accounting for 38 per cent and North America, 47 per cent. Among
developing economies, China and Hong Kong (China) together accounted for 6.6 per cent.
In Ireland, inflows more than trebled from 2014 to $101 billion. Intracompany loans rose by
$37 billion, accounting for much of the increase. M&A sales were boosted by the Medtronic-
Covidien inversion megadeal (chapter I.A). In the Netherlands, inflows rose by 39 per cent
to $73 billion, of which equity investments were $61 billion – more than trebling from the
year before. However, cross-border M&A sales in the country increased by just $2 billion to
$15.5 billion.
France’s inflows almost trebled, to $43 billion, most of which was accounted for by the
equity component of inflows, which rose to $37 billion. M&A sales reached a record high at
$44 billion. Major transactions included the merger of the cement manufacturer Lafarge with its
Swiss rival Holcim in a deal worth $21 billion, and the acquisition of Alstom’s energy business
by GE (United States) for $11 billion. Cross-border M&A sales in the United Kingdom almost
doubled in 2015, to $71 billion, with pharmaceuticals ($17 billion) and real estate ($12 billion)
being the largest target industries. Chinese investors were active in the latter. Supported by a
robust economic performance, especially compared with other European economies, equity
Outflows
Europe became the world’s largest investing region. FDI by MNEs in Europe shot up by
85 per cent to $576 billion, accounting for more than one third of the world total. The Netherlands
became the largest investor country in Europe, with outflows worth $113 billion, followed by
Ireland where outflows more than doubled, to $102 billion. Germany remained a top investor
country, despite its outflows falling by 11 per cent to $94 billion. The increase in outflows from
Switzerland was the largest among developed countries (an increase of $74 billion). Other
major investor countries in Europe were Luxembourg (up 68 per cent to $39 billion), Belgium
(a more than sixfold increase to $39 billion) and France (down 18 per cent to $35 billion).
Outflows from the United Kingdom rose by $20 billion but remained negative at −$61 billion.
Cross-border M&A purchases by European MNEs amounted to $318 billion, of which 76 per
cent were in manufacturing. This was largely driven by deals in the pharmaceutical industry,
which accounted for 40 per cent of the total. The financial and insurance industry attracted
another 18 per cent. At the same time, a number of industries recorded a net divestment,
including some related to mining and utilities. European MNEs invested in other developed
economies: of their total cross-border M&A purchases, one third went to acquisitions in Europe
and two thirds to acquisitions in North America. In developing regions, European MNEs made
a net divestment of assets in Asia as well as in Latin America. The share of Africa in MNEs’
investments was 6 per cent.
Ireland and the Netherlands led the rise in FDI outflows from Europe. Corporate inversion deals
were largely responsible for this performance, as large United States MNEs became affiliates of
newly created parent companies in these economies, thereby boosting their outward FDI (box
II.6). In a similar vein, the Netherlands was a preferred site of incorporation for South Africa
based retailer Steinhoff, which took advantage of a reverse takeover by Genesis International
Holdings, incorporated in the Netherlands, to relocate to Europe. The holding company was
renamed Steinhoff International Holdings N.V. before the transaction was finalized. Steinhoff,
while retaining its operational headquarters in South Africa, transferred ownership of its assets
to this holding company in the Netherlands and moved its primary listing to Frankfurt.
Declining overseas earnings dented FDI outflows from the United States, but
Canadian outward investment increased by 21 per cent. At $367 billion, FDI from North
America remained at a level similar to 2014. A 5 per cent decline in FDI from the United States
was offset by a large increase of investment by Canadian MNEs. Reinvested earnings have
dominated outward FDI from the United States in recent years: they accounted for 91 per cent
of outflows in 2015. Compared with 2014, reinvested earnings, though still high, declined by
16 per cent to $274 billion.
Regulatory changes enacted in September 2014 in the United States to curb tax inversions
have begun to have impacts. In October 2014, AbbVie (United States) called off its $54 billion
acquisition of Shire (Ireland), citing the new guidelines as a key reason. However, a number
of inversion deals were announced in 2015, including the $27 billion merger of Coca-Cola
Enterprises (United States) with its counterparts in Germany and Spain, to create a new company
headquartered in the United Kingdom. In response, the United States Government announced
additional measures to tighten loopholes in November 2015 and April 2016 (chapter III). After
the last announcement, Pfizer abandoned its proposed $160 billion merger with Ireland-based
Allergan (box II.6).
Acquisitions in the pharmaceuticals industry over the past few years illustrate the strategic and tax considerations that have been driving the
M&A surge in developed economies (chapter I).
In 2012, Actavis, a Swiss pharmaceutical group, was acquired by Watson (United States), which had grown rapidly through a series of
acquisitions in the United States. The following year, the merged entity – which retained the name Actavis – acquired Ireland-based Warner
Chilcott. In addition to diversifying Actavis’s product range, this deal carried two advantages. First, at the time of the deal’s announcement,
competitors Valeant (Canada) and Mylan (United States at the time) were targeting Actavis for a takeover. Actavis was able to fend off such
threats by making itself larger. Second, Actavis was able to relocate its headquarters to Ireland, thus benefiting from the country’s lower tax
rate. In 2014, Actavis made further acquisitions, including Forest Laboratories (United States) for $25 billion. Acting as a white knight, Actavis
then acquired Allergan (United States), which was the target of a hostile bid from Valeant (Canada). After the takeover, the Ireland-based
company renamed itself Allergan.
Frenetic deal making around Allergan and its competitors continued after the completion of the Actavis-Allergan deal. In November 2015,
the United States pharmaceutical giant Pfizer announced a merger agreement with Allergan worth $160 billion, which would have allowed
Pfizer to relocate to Ireland: however, this plan was dropped following regulatory changes in the United States in April 2016. This was Pfizer’s
second failed attempt in as many years to achieve inversion: in May 2014, it had abandoned its $110 billion bid for AstraZeneca (United
Kingdom), owing to political pressure and changes in the United States tax inversion regulations (chapter III).
Separately, in July 2015, Teva (Israel) agreed to buy Allergan’s generics unit (Actavis Generics) for $41 billion, pending approval from the
regulatory authorities. Teva had previously been in pursuit of Mylan. The latter, while fending off this hostile bid, concluded a deal to purchase
the assets of Abbott Laboratories outside the United States in 2015, thereby shifting its headquarters to the Netherlands.
Source: ©UNCTAD.
FDI flows from Canada rose by 21 per cent to $67 billion, driven by investment in the finance and
insurance industry, which shot up fivefold. Pension funds were extensively involved in Canadian
outward FDI. Of 22 overseas acquisitions worth more than $1 billion by Canadian investors,
pension funds were involved in 9. Canada’s 10 largest public pension funds collectively manage
over $1.1 trillion in assets, of which $500 billion is thought to be invested abroad. The funds
run a network of offices outside Canada to seek additional investment opportunities.8 Their
preferred approach to asset management is to invest directly (rather than in publicly traded
stocks) and manage internally at low cost.9 About one third of their assets are invested in
alternative classes (e.g. infrastructure, private equity, real estate), which accounts for the
pattern of their cross-border acquisitions. In the financial industry, Canada’s big banks were
also looking for investment opportunities abroad as the growth of the domestic banking markets
slowed. Acquisitions of assets divested by GE were among the largest deals completed by
Canadian investors in finance and insurance in 2015, including the acquisition of GE Antares
Capital (United States) for $12 billion. A Canadian pension fund was also a joint partner in
the acquisition of the 99-year lease of Australian State-owned TransGrid, an operator of an
electricity transmission network, for $7.4 billion.
Financial MNEs led Japan’s FDI expansion. In Asia-Pacific, Japanese MNEs, beset by
limited prospects in their home market, continued to seek growth opportunities abroad.
Outflows reached $129 billion, exceeding $100 billion for the fifth consecutive year. Two thirds
of Japanese outflows targeted developed countries, with North America accounting for 35 per
cent and Europe 25 per cent. The share of Asia was 24 per cent. Outflows in the finance and
insurance industry doubled from 2014, to $32 billion, representing a quarter of all Japanese
outflows. Insurance companies were particularly active, making acquisitions most notably in
the United States but also in Asia. This illustrates the growing importance of developing Asia
economies not merely as production bases but as growing consumer markets. For instance, the
share of services in Japanese FDI stock in China at the end of 2014 was less than one third.
In contrast, services accounted for 40 per cent of Japanese FDI flows to China both in 2014
and in 2015.
FDI flows, top 5 host economies, 2015 (Value and change) +33.4%
Share in world
2.0%
Bangladesh
$2.2 bn
+44.1% Myanmar
$2.8 bn
+198.4%
Ethiopia
$2.2 bn
+1.7%
Angola
$8.7 bn
+351.7%
Mozambique
$3.7 bn
-24.3%
6
Republic of Korea 3
Outflows: top 5 home economies
5
(Billions of dollars, and 2015 growth) Hong Kong, China 5
Thailand 5
1
Angola $1.89 -55.5%
Dem. Rep. France 3
of Congo $0.51 +47.8% 0
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Final boundary between
the Republic of Sudan and the Republic of South Sudan has not yet been determined. Final status of the Abyei area is not yet determined. Dotted line in Jammu and Kashmir
represents approximately the Line of Control agreed upon by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties.
• FDI inflows jumped by one third
HIGHLIGHTS • China now holds the largest stock of FDI
• FDI prospects are subdued
0.3 1.0 1.1 2.2 1.5 0.7 0.7 0.7 1.2 1.4 1.7 1.4 1.5 1.5 2.1 2.0
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Latin America and the Caribbean Asia Africa Oceania Share in world total
Inflows
Despite weak commodity prices, FDI to LDCs hit a record high, bolstered by loans
to foreign affiliates based in Angola. FDI inflows reached $35 billion, representing 2 per
cent of global FDI and 5 per cent of FDI in all developing economies. Yet declining commodity
prices (chapter I) discouraged new energy and mining investments in the majority of LDCs, and
even resulted in operations shutting down or being suspended in a number of African countries.
Sluggish transactions in mining and quarrying also contributed to a slump in the net sales value
of cross-border M&As in LDCs (table A). The largest fall in FDI flows was observed in a number
of resource-rich LDCs in Africa, even though some continued to attract MNEs’ interest in large-
scale greenfield projects in hydrocarbons and mining (table II.2).
FDI flows to the LDCs remains concentrated in the extractive industries and related manufacturing
activities, although the amounts received by countries have varied considerably depending on
the goods and services they export (UNCTAD, 2015b) (figure II.9). Since 2011, seven mineral
exporters10 in Africa have been the largest recipients of FDI flows to LDCs, but in line with the
downward pressure on mineral commodity prices, their FDI fell by more than 25 per cent; and
FDI to three of them – the Democratic Republic of the Congo, Mozambique and Zambia –
showed negative growth.
By contrast, the majority of fuel exporters11 reported positive gains. Angola (up 352 per cent to
$8.7 billion) became the largest FDI recipient among LDCs in 2015. However, its performance
was largely due to an influx of loans ($6.7 billion in 2015, compared with −$1.6 billion
in 2014) provided to struggling foreign affiliates in the country by their parents abroad.
15
10
0
Mineral Fuel Mixed Services Manufactures Food and agricultural
exporters exporters exporters exporters exporters exporters
-5
While divestments from South Sudan and Yemen continued (but at a lower level than in 2014),
FDI flows to Chad bounced back from −$676 million in 2014 to $600 million, and those to the
Sudan rebounded to $1.7 billion – the highest level in three years.
Total FDI in the small group of food and agricultural exporters12 increased by 14 per cent in
2015. Services exporters,13 which make up nearly one third of the 48 countries in the grouping,
registered growth of 9 per cent. The performance of the larger FDI hosts in this group was
modest – Ethiopia (up 2 per cent to $2.2 billion, representing 43 per cent of flows to this group)
and Uganda (down 0.1 per cent to $1.1 billion). The performance in others – e.g. Liberia (up
85 per cent to $512 million) and Madagascar (up 48 per cent to $517 million) – bounced back.
FDI to Rwanda maintained its upward trajectory (up 3 per cent to a record high of $471 million).
Strong FDI in Asia drove inflows to manufactures and mixed exporters. Five
manufactures exporters14 reported 18 per cent growth in FDI flows, thanks to record flows
to Bangladesh (up 44 per cent to over $2.2 billion). FDI in the textile and garments industries
remains strong in Bangladesh, as does FDI in power generation.15 Reinvested earnings in the
country continued to rise, exceeding the value of the equity component. Bangladesh became
the largest FDI host in this subgroup of exporters, as flows into Cambodia fell slightly (down
1 per cent to $1.7 billion). Although the majority of mixed exporters16 in Africa, including the
United Republic of Tanzania, reported losses, overall FDI into this group rose by 20 per cent
to $7.4 billion (see figure II.9). Prospects of deeper economic integration in the ASEAN region
spurred investments into two Asian LDC economies: the Lao People’s Democratic Republic (up
69 per cent to a record high of $1.2 billion) and Myanmar (up 198 per cent to $2.8 billion, the
highest in five years).
In cross-border M&A sales, two large deals in Cambodia ($302 million in a hotel resort complex
by an Australian MNE) and Myanmar ($560 million in malt beverages by a Japanese MNE)
together accounted for 85 per cent of net M&A sales in all LDCs (table B). The saturation of the
domestic economy has forced many Japanese brewers to seek new markets with high-growth
potential overseas.17
China has become the largest source of investment in LDCs. From 2009 to 2014 (the
latest year available), MNEs from China more than quadrupled their FDI stock in LDCs (figure
A). FDI from China in the three ASEAN LDCs grew from $2.9 billion in 2009 to $11.6 billion in
Prospects
Natural resources still largely determine LDCs’ FDI prospects. Although the number of
greenfield projects in LDCs announced in 2015 fell by 6 per cent, the number of those targeting
the mining, quarry and petroleum industries more than doubled, to a three-year high. The
10 largest greenfield projects announced in 2015 (see table II.2) highlight MNEs’ intentions to
pursue large-scale hydrocarbon projects in resource-rich African LDCs, despite weak energy
prices and deteriorating short-term profitability.
Long-term greenfield project data suggest that LDCs are diversifying their FDI portfolios away
from extractive industries towards the services sector, but many MNEs are still focused mainly
on investment opportunities in untapped or underdeveloped natural resources. As a result, FDI
over the next few years looks set to remain highly concentrated in the larger resource-rich
economies, which have already become major FDI recipients by attracting large investments in
the extractive industries, as well as in electricity, construction and other associated projects in
the services sector. FDI in Myanmar, for instance, is expected to keep growing and diversifying:
approved FDI projects for 2015 totalled $9.5 billion, of which more than 50 per cent was
attributed to the oil and gas industry and 20 per cent to transport and communications.18
For fiscal year 2016/2017, Myanmar aims to secure $8 billion of new FDI in agriculture, trade
and infrastructure to accelerate its economic development.19
MNEs from the South are actively seeking investment opportunities in LDCs. For
instance, during 2015, the Indian State-owned Oil and Natural Gas Corporation (ONGC), which
concluded a $2.6 billion acquisition deal in oil and gas extraction in Mozambique in 2014,
announced plans to double its investment in oil and gas projects in Africa (where the company
has already invested $8 billion).20 Chinese investors plan to maintain their interests in LDCs
in Africa. Though about half of their capital spending plans announced in 2015 ($1.3 billion
in 14 projects) targeted Asian LDCs, including Nepal, more than 40 per cent of total spending
plans targeted Liberia, where Wuhan Iron and Steel announced investments valued at $865
million in construction and $179 million in metal manufacturing.
In the services sector, greenfield project data points to a strong growth in FDI from MNEs
based in developing Asian economies. The estimated capital spending on greenfield projects
announced by Asian investors more than doubled in 2015 (table D). Thai investors increased
their capital spending plans in LDCs by eight times from 2014 to 2015 to $8 billion (from
22 to 33 projects, of which 30 are in ASEAN LDCs). Almost all projects in Myanmar listed in
table II.2 are linked to the public-private partnership for developing the Dawei SEZ (box II.6,
WIR14), which finally got going during 2015. Capital spending plans by Indian MNEs in 2015
(in 20 projects) were boosted by two proposed large-scale electricity projects in Bangladesh but
remained below the peak of $4.8 billion (in 39 projects) announced in 2011.
LDCs in Asia and East Africa will continue to benefit from FDI from Asian MNEs by attracting a
larger amount of FDI, as well as public and private capital in (regional) infrastructure development.
In contrast, smaller and more fragile LDCs still face challenges in attracting steady flows of FDI.
24.5 bn
LANDLOCKED 2015 Decrease
Turkmenistan Kazakhstan
$4 bn
$4.3 bn -52.2%
+2.1%
Azerbaijan
$4 bn
-8.6%
Ethiopia
Zambia $2.2 bn
$1.7 bn +1.7%
-48.3%
Flows, by range
Above $1 bn
Figure A. Top 10 investor economies,
$0.5 to $0.9 bn by FDI stock, 2009 and 2014 (Billions of dollars)
Top 5 host economies
$0.1 to $0.5 bn 26
Economy China 6
$10 to $99 mn $ Value of inflows
United States 17
Below $10 mn 2015 % change 10
Turkey 8
5
0.3 0.9 1.3 1.6 1.8 0.7 0.8 0.8 1.7 2.2 1.9 2.3 2.3 2.1 2.3 1.4
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Transition economies Asia and Oceania Africa Latin America and the Caribbean Share in world total
Inflows
Among the transition economy subgroup of LLDCs, Turkmenistan was the largest recipient of
inflows, followed by Azerbaijan, as the hydrocarbon sector continued to attract foreign investors
in both countries. FDI flows to Kazakhstan plunged by over half, from $8.4 billion to $4 billion.
FDI in the country has been negatively affected by the weakened economic performance
of the Russian Federation, Kazakhstan’s largest trading partner. However, most of this fall
was accounted for by a reversal in reinvested earnings, from almost $5 billion in 2014 to
−$200 million last year; equity inflows into the country actually increased, from −$300 million
in 2014 to $2.2 billion, sounding a note of optimism for FDI in the economy. The move to a
free-floating exchange rate in August immediately devalued the tenge by a third against the
United States dollar and thus contributed to the reduction in the value of inward FDI stock in
Kazakhstan, although this may also have the effect of accelerating investor plans.
Among the African subgroup of LLDCs, Ethiopia continued to attract foreign investments, with
inflows rising slightly to almost $2.2 billion, making it the fourth largest LLDC recipient. FDI to
Uganda remained the same as in 2014, mainly accounted for by a large increase in reinvested
earnings (up 253 per cent) which displaced equity inflows as the largest FDI component.
FDI to Zambia collapsed by almost 50 per cent, to $1.7 billion. The decline is linked to the price
of copper, which fell to its lowest level since 2009.
FDI flows to the Asian subgroup of LLDCs increased by 26 per cent to $1.5 billion, mainly due
to the Lao People’s Democratic Republic’s upward FDI trajectory, as the country continued to
attract investment from Vietnamese, Thai and Chinese investors. Inflows to the country reached
$1.2 billion, up 69 per cent on 2014. FDI in Mongolia dropped again, to $195 million, a shadow
of its position just four years ago, despite the announcement by Rio Tinto (United Kingdom) of a
$5 billion investment in the Oyu Tolgoi copper and gold mine. Equity inflows have been on the
decline, and reinvested earnings have been negative for the past three years, indicating that
investors are taking money out of the country.
On the upside, cross-border M&As in the LLDCs rebounded in 2015. Following net
negative sales (down $1 billion) in 2014, cross-border M&As in the grouping jumped to
$2.6 billion last year. This was driven mainly by FDI in the primary sector, and in particular
the mining industry (table A). State-owned firms from Malaysia and China continued to seek
strategic investments despite the decline in commodity prices (table B). Nevertheless, the
strength of the M&A rebound was offset by divestments by firms from the Russian Federation
valued at $1.2 billion as well as continued divestment by firms based in the Netherlands.
4.8 bn
SMALL ISLAND 2015 Decrease
Maldives
$0.3 bn
-2.9%
Bahamas
$0.4 bn
-75.9%
Jamaica
$0.8 bn
+34.3%
Trinidad
and Tobago
$1.6 bn Fiji
-35.0% $0.3 bn
-3.0%
Source: ©UNCTAD.
Note: The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Final boundary between
the Republic of Sudan and the Republic of South Sudan has not yet been determined. Final status of the Abyei area is not yet determined.Dotted line in Jammu and Kashmir
represents approximately the Line of Control agreed upon by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties.
• Inflows dropped to a five year low
HIGHLIGHTS • Developing economies account for a majority of the top 10 investors
• FDI prospects are expected to decrease in 2016
0.2 0.4 0.4 0.6 0.5 0.5 0.4 0.4 0.6 0.4 0.3 0.4 0.4 0.4 0.6 0.3
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Latin America and the Caribbean Asia Africa Oceania Share in world total
Inflows
The commodity downturn hit the largest SIDS host economy, Trinidad and Tobago.
The slowdown of energy MNEs’ activities contributed to a 35 per cent contraction in FDI flows to
Trinidad and Tobago, where more than 80 per cent of FDI stock is held in mining, quarrying and
petroleum. In Jamaica, where mining and fuels generated nearly 70 per cent of merchandise
exports in 2014, FDI grew by 34 per cent to $794 million, making it the second largest FDI host
economy in the group in 2015. Unlike in Trinidad and Tobago, Jamaica’s FDI portfolio is more
diversified and depends more on the services sector, and the growing tourism industry helped
the latter SIDS attract more foreign capital not only in tourism but also in other industries.24
FDI flows into the Bahamas, the second largest FDI recipient in 2014, tumbled by 76 per
cent from $1.6 billion in 2014 to $385 million in 2015, the lowest in 13 years. Intercompany
loans to tourism-related construction projects, which supported FDI growth in 2013 and 2014,
contracted by nearly $1 billion,25 and equity investment fell from $325 million in 2014 to
$97 million in 2015. FDI flows into Barbados fell by 48 per cent, to $254 million. As a result,
FDI flows to the 10 Caribbean SIDS contracted by 37 per cent to $3.6 billion.
In all other regions, leading FDI hosts saw their FDI inflows shrink. In Africa, five SIDS
reported a 35 per cent reduction in FDI flows (from $815 million in 2014 to $531 million in
2015) as they were suffering from lower investment in the tourism sector. FDI flows to Mauritius
contracted by 50 per cent to $208 million, although this is likely to be only a hiatus. For instance,
a record high investment of $1.9 billion (for the next five years) was recently approved.26
In addition to weaker investment flows to hotels and restaurants,27 a slowdown in the construction
industry28 suggests reduced foreign investments in high-end real-estate projects, where more
than 40 per cent of FDI flows had been generated. Seychelles also registered negative FDI
growth (down 15 per cent to $195 million).
In Asia and Oceania, where the scale of FDI flows is much smaller in relation to official
development flows,29 reductions in FDI flows were less significant (down 4 per cent to
$367 million and up 124 per cent to $323 million, respectively). Maldives ($324 million) and
Fiji ($332 million) both reported a decline of 3 per cent from 2014 to 2015. FDI in Papua New
Guinea, where mining, quarrying and petroleum accounts for nearly 90 per cent of FDI stock,
remained negative at −$28 million.
Despite the overall FDI decline, the net sales value of cross-border M&As in SIDS
(excluding the Caribbean offshore centres) increased by 55 per cent. The largest deal
of the year, a $3 billion acquisition of Bahamas-based Columbus International by Cable &
Wireless Communications (CWC) (United Kingdom) (table II.4), was followed by a takeover offer
to CWC by another major MNE, Liberty Global (United Kingdom). CWC, listed in London but
headquartered in Miami (United States), has been active in the Caribbean SIDS, mainly through
two brands: LIME (excluding the Bahamas) and BTC (Bahamas).30 Large deals were recorded in
the manufacturing sector for two consecutive years (table A). In 2015 Sime Darby, a Malaysian
State-owned enterprise, acquired Papua New Guinea’s largest agribusiness company,
New Britain Palm Oil, for $1.7 billion.31
Driven by investments from China and Malaysia, net cross-border M&A sales involving investors
from developing economies hit the highest level in a decade. In contrast, net sales to developed-
economy investors became negative for the fourth time in the past five years. United Kingdom
investors divested a total of $1.2 billion (in two deals) by selling assets in the Caribbean SIDS to
other foreign companies. In 2011–2015, investors from the global South were responsible for
$6.5 billion worth of M&A transactions, while MNEs from developed economies divested a net
$2.3 billion. Over that period, Australian investors divested $2.9 billion, followed by the United
States ($1.8 billion). Chinese MNEs, by contrast, led cross-border M&A transactions in SIDS
with $2.6 billion in acquisitions, followed by French MNEs ($2.5 billion).
Growing presence of developing economies in the top 10 sources of FDI stock in
SIDS. Cross-border M&A transactions reflect the growing FDI footprint of investors from the
global South in SIDS. Although developed countries, such as Canada and the United States,
still hold the highest levels of FDI stock in SIDS,32 6 of the top 10 investors are developing
economies (figure A). Some of this FDI, however, is held in countries such as the Bahamas and
Mauritius,33 which MNEs also use for onward investment.
Although not among the top 10 investors, Chinese FDI stock in SIDS more than trebled between
2009 and 2014, to $3 billion, mostly because of a $1 billion expansion in Trinidad and Tobago’s
hydrocarbons sector, a $0.5 billion rise in Oceanian SIDS,34 and another $0.5 billion in African
SIDS (Cabo Verde, Mauritius and Seychelles).35
Prospects
Weak commodity prices and the slowdown of the Chinese economy affected capital spending in
the greenfield FDI projects announced in 2015 (tables C and D).36 Even though the number of
announced projects was reduced only marginally (from 52 in 2014 – the highest in six years –
to 51 in 2015), the 30 per cent decline in estimated capital spending suggests that investment
prospects in SIDS remain poor in the short term. Similar to the cases in the LDCs and LLDCs,
the uneven distribution of FDI among SIDS is likely to continue.
Prospects for large-scale investments in SIDS’ extractive industries are weak. No new
hydrocarbon project was announced in 2015 for the second year running. A $200 million
metal (manufacturing) project in Trinidad and Tobago (table II.5) was the only greenfield project
announced in extractive related industries in SIDS. Compared with the annual average of
2012–2014, the level of expected new investments in Trinidad and Tobago fell by 24 per cent
to $423 million (in three projects) and by 85 per cent to $254 million (in six projects) in Papua
New Guinea. This prospect can be easily overturned by an investment decision of a single MNE
operating in or targeting one resource-rich SIDS, and it should not prevent these resource-rich
SIDS from attracting FDI in other industries (see table II.5).
Recent policy
developments
and key issues
A. National
Investment Policies
1. Overall trends
National investment policies continue to be geared towards investment liberalization and
promotion.
In 2015, 46 countries and economies adopted 96 policy measures affecting foreign investment.1
Of these measures, 71 related to liberalization, promotion and facilitation of investment, while 13
introduced new restrictions or regulations on investment (table III.1). The share of liberalization
and promotion reached 85 per cent, which is above the average between 2010 and 2014
(76 per cent) (figure III.1).
Nearly half (42 per cent) of all policy measures were undertaken by Asian developing economies.
Countries in Europe, Africa and the transition economies also introduced numerous policy
measures (figure III.2). Those in Africa, Asia and North America were most active in liberalizing,
promoting or facilitating foreign investment. Some countries in Oceania and some in Latin
America and the Caribbean were more restrictive, mainly because of concerns about foreign
ownership of land and natural resources.
Number of regulatory
97 94 125 164 144 126 79 68 89 116 86 92 88 72 96
changes
Liberalization/promotion 85 79 113 142 118 104 58 51 61 77 62 65 64 52 71
Restriction/regulation 2 12 12 20 25 22 19 15 24 33 21 21 21 11 13
Neutral/indeterminate a 10 3 - 2 1 - 2 2 4 6 3 6 3 9 12
Source: ©UNCTAD, Investment Policy Monitor database.
a
In some cases, the expected impact of the policy measures on the investment is undetermined.
The broad concept of “national security” also translates into a variety of criteria that national
authorities consider in their investment screening procedures. These criteria include, inter alia,
the impact of a proposed transaction on public safety, social order, plurality of the media,
strategic national interests, foreign relations, disclosure of State secrets, territorial integrity,
independence of the State, protection of rights and freedoms of citizens, continuity of public
procurements or terrorism related concerns.
Canada Japan
In 2015, amendments were introduced to the Investment Canada In 2007, Japan expanded the coverage of the prior notification
Regulations and the National Security Review of Investments requirement for foreigners acquiring a stake in companies in
Regulations. These amendments required investors to provide designated industries. Amendments of the Cabinet Order on Inward
more information with their filings in order to assist in the review Direct Investment and other rules adjusted the list of industries
process and extended the length of certain time periods for the covered to include those that produce sensitive products (such as
Government to carry out national security reviews under the arms, nuclear reactors and dual-use products), as well as industries
Investment Canada Act. that produce sensitive products or provide related services. The
stated purpose of the amendments is to prevent the proliferation
China of weapons of mass destruction and damage to the defence
production and technology infrastructure.
On 1 July 2015, the National Security Law came into effect. As a
framework law, it lays down the general principles and obligations of
Republic of Korea
the State in maintaining security in the country. Article 59 of the Law
allows the State to establish, inter alia, a national security review In 2008, the Ministry of Commerce, Industry and Energy made an
and oversight mechanism to conduct a national security review of amendment to the Enforcement Decree of the Foreign Investment
foreign commercial investment, special items and technologies, Promotion Act by Presidential Decree No. 20646. The amendment
internet services, and other major projects and activities that might aims to provide more clarity on the bases and procedures for
affect national security. The framework for such reviews based on restricting foreign investment on the basis of national security
national security considerations had first been established in 2011. concerns and to provide legal stability to both foreign and domestic
In April 2015, trial procedures for a national security review of investors by allowing them to request a preliminary investigation on
foreign investment in the free trade zones in Shanghai, Tianjin, and whether a certain investment is subject to restriction for national
the provinces of Guangdong and Fujian were published by the State security reasons.
Council’s general office.
Russian Federation
France
In 2014 amendments were made to the Federal Law “On the
In 2014, the Minister of Economy issued a decree amending the list of Procedures of Foreign Investments in the Business Entities of
activities subject to review for foreign investors equipment, services Strategic Importance for National Defence and State Security”
and products that are essential to safeguard national interests in (No. 57-FZ) by adding three types of activities deemed to be of
public order, public security and national defence, as follows: (i) such strategic importance: (i) evaluation of the vulnerability of
sustainability, integrity and safety of energy supply (electricity, gas, transport infrastructure facilities and the means of transport
hydrocarbons or other sources of energy); (ii) sustainability, integrity by specialized organizations, (ii) the protection of transport
and safety of water supply; (iii) sustainability, integrity and safety infrastructure facilities (iii) the means of transport by transport
of transport networks and services; (iv) sustainability, integrity and security units from acts of unlawful intervention; and (iv) the
safety of electronic communications networks and services; (v) support to certification of transportation security by the certifying
operation of a building or installations of vital importance as defined authorities. Other amendments that were made to Federal Law
in articles L. 1332-1 and L.1332-2 of the Code of Defence; and (vi) No. 57-FZ exempt certain operations from the remit of the Law on
protection of public health. Strategic Entities, but bring property classified as production assets
of a strategic company – valued at more than 25 per cent of the
Germany strategic entity’s balance sheet assets – under the law’s scope.
In 2009, Germany amended its legislation to be able to exceptionally
United States
prohibit investments by investors from outside the European Union
(EU) and the European Free Trade Association that threaten to In 2007, the United States adopted the Foreign Investment and
impair public security or public order. National Security Act, which amends the primary vehicle for
screening foreign acquisitions on the basis of national security:
Italy the Defense Production Act of 1950. The Act expands, inter alia,
the membership of and senior-level accountability within the
In 2012 (and the subsequent years), Italy established a new
Committee on Foreign Investment in the United States (CFIUS), adds
mechanism for government review of transactions regarding
to the illustrative list of national security factors for the CFIUS and
assets of companies operating in the sectors of defence or national
the President to consider, requires the CFIUS to monitor and enforce
security, as well as in strategic activities in the energy, transport and
compliance with mitigation measures and to track withdrawn
communications industries.
notices, and allows the CFIUS to re-open a review if the parties
made a material omission or misstatement to the CFIUS, or if the
parties intentionally and materially breach a mitigation agreement.
Source: Based on UNCTAD’s Investment Policy Hub and web research.
Australia Italy
Australia’s foreign investment screening process allows the In 2014, the president of the Council of Ministers authorized the
treasurer to review foreign investment proposals (that meet certain acquisition of Piaggio Aero (aircraft production) by Mubadala
criteria) on a case-by-case basis to ensure that they are not Development Company (United Arab Emirates), and in 2013, the
contrary to Australia’s national interest. The national interest test acquisition of Avio SpA (aviation technology) by General Electric but
includes consideration of national security issues. The treasurer has subjected both transactions to strict conditions, such as compliance
the power to block foreign investment proposals or apply conditions with requirements imposed by the Government on the security of
to the way proposals are implemented to ensure they are not supply, information and technology transfer; guarantees for the
contrary to the national interest. It is very rare that the treasurer continuity of production, maintenance and overhaul of logistical
would block a proposal. In the past decade only a few proposals systems; and control over the appointment of senior representatives.
have been blocked (China Nonferrous Metal Mining’s 2009 bid for
Lynas Corporation, Singapore Exchange Ltd’s 2010 bid for ASX Ltd,
India
ADM’s 2013 bid for GrainCorp and Genius Link Asset and Shanghai
Pengxin’s 2015 bid for S. Kidman & Co Ltd). In 2010, Bahrain Telecommunications’ plan to raise its holdings
in S. Tel Private Limited, as well as Etisalat DB Telecom Private
Canada Limited’s proposal to increase its ownership stake in Swan Telecom
were both rejected on national security grounds by India’s Foreign
In 2013 the Government rejected on national security grounds
Investment Promotion Board.
Accelero Capital Holdings’ bid for the Allstream division of Manitoba
Telecom Services.
New Zealand
e. Conclusion
In recent years, national security-related concerns have gained more prominence in the
investment policies of numerous countries. Different approaches exist to reviewing and
eventually restricting foreign investment on national security-related grounds. These range
from formal investment restrictions to complex review mechanisms with broad definitions and
broad scope of application to provide host country authorities with ample discretion in the
review process. Although national security is a legitimate public policy concern, countries may
wish to consider giving more clarity to the concept and scope of national security in their
investment-related legislation. In addition, in cases where countries use a broad concept of
national security, they may want to consider whether there is room for using alternative policy
approaches (chapter IV).
Annual
number of IIAs Annual BITs Annual TIPs All IIAs cumulative
350
Cumulative
number of IIAs
3304
300
250
200
150
100
50
0
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Treaties with investment provisions (TIPs), previously referred to as “other IIAs”, encompass a variety of international agreements with investment
protection, promotion and/or cooperation provisions – other than BITs. TIPs include free trade agreements (FTAs), regional trade and investment
agreements (RTIAs), economic partnership agreements (EPAs), cooperation agreements, association agreements, economic complementation
agreements, closer economic partnership arrangements, agreements establishing free trade areas, and trade and investment framework
agreements (TIFAs). Unlike BITs, TIPs may also cover plurilateral agreements involving more than two contracting parties.
The 358 TIPs in existence today differ greatly in the extent to which and the manner in which they contain investment-related commitments.
Of these, there are
• 132 TIPs that include obligations commonly found in BITs, including substantive standards of investment protection and ISDS. Among
the TIPs concluded in 2015, nine belong in this category: the Australia–China FTA, the China–Republic of Korea FTA, the Eurasian
Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan and the Russian Federation)–Viet Nam FTA,a the Honduras–Peru FTA, the
Japan–Mongolia EPA, the Republic of Korea–New Zealand FTA, the Republic of Korea–Turkey Investment Agreement, the Republic of
Korea–Viet Nam FTA, and the Singapore–Turkey FTA.
• 32 TIPs that include limited investment provisions. Among the TIPs concluded in 2015, the EU–Kazakhstan Enhanced Partnership and
Cooperation Agreement is an example of an agreement that provides limited investment-related provisions (e.g. national treatment with
respect to commercial presence or free movement of capital relating to direct investments).
• 194 TIPs that establish an institutional framework between the parties to promote and cooperate on investment. Examples include the
Armenia–United States TIFA (2015).
The complete list of TIPs and their texts can be found on UNCTAD’s IIA Navigator at the Investment Policy Hub (http://investmentpolicyhub.
unctad.org/IIA).
Source: ©UNCTAD.
a
Chapter 8, “Trade in Services, Investment and Movement of Natural Persons”, applies only between the Russian Federation and Viet Nam.
In 2015, investors initiated 70 known ISDS cases pursuant to IIAs, which is the highest
number of cases ever filed in a single year (figure III.4; see also UNCTAD, 2016 forthcoming).
As arbitrations can be kept confidential under certain circumstances, the actual number of
disputes filed for this and previous years is likely to be higher.
As of 1 January 2016, the total number of publicly known ISDS claims had reached 696. So far,
107 countries have been respondents to one or more known ISDS claims.
Annual
number of cases ICSID Non-ICSID Cumulative number
of known ISDS cases
70
60
696
50
40
30
20
10
0
1987 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
As in the two preceding years, the relative share of cases against developed countries remained
at about 40 per cent. Prior to 2013, fewer cases were brought against developed countries. In
all, 35 countries faced new claims last year. Spain was the most frequent respondent in 2015,
followed by the Russian Federation (figure III.5). Six countries – Austria, Cameroon, Cabo Verde,
Kenya, Mauritius and Uganda – faced their first (known) ISDS claims.
Developed-country investors brought most of the 70 known cases in 2015. This follows the
historical trend in which developed-country investors have been the main ISDS users, accounting
for over 80 per cent of all known claims. The most frequent home States in ISDS in 2015 were
the United Kingdom, followed by Germany, Luxembourg and the Netherlands (figure III.6).
Intra-EU disputes
Similarly to the two preceding years, intra-EU cases accounted for about one third of investment
arbitrations initiated in 2015. These are proceedings initiated by an investor from one EU
member State against another member State. The overwhelming majority – 19 of 26 – were
brought pursuant to the Energy Charter Treaty and the rest on the basis of intra-EU BITs.
The overall number of known intra-EU investment arbitrations totalled 130 by the end of 2015,
i.e. approximately 19 per cent of all known cases globally.
Whereas the majority of investment arbitrations in 2015 were brought under BITs, the Energy
Charter Treaty was invoked in about one third of the new cases. Looking at the overall trend,
the Energy Charter Treaty is by far the most frequently invoked IIA (87 cases), followed by the
North American Free Trade Agreement (NAFTA) (56 cases). Among BITs, the Argentina–United
States BIT (20 cases) remains the agreement most frequently relied upon by foreign investors.
1987–2014 2015
Argentina 3 59
Bolivarian Republic of Venezuela 36
Czech Republic 3 33
Spain 15 29
Egypt 1 26
Canada 2 25
Mexico 2 23
Ecuador 1 22
Russian Federation 7 21
Poland 20
Ukraine 3 19
India 1 17
1987–2014 2015
Netherlands 9 80
United Kingdom 10 59
Germany 9 51
Canada 3 39
France 4 38
Spain 3 34
Luxembourg 9 31
Italy 2 30
Switzerland 1 23
Turkey 1 19
Cyprus 2 18
In addition to the Energy Charter Treaty (23 new cases), three other treaties were invoked more
than once in 2015:
• Russian Federation–Ukraine BIT (6 cases)
• NAFTA (3 cases)
• Czech Republic–United Kingdom BIT (2 cases)
Some TIPs invoked by claimants in 2015 included the Commonwealth of Independent States
(CIS) Investor Rights Convention (1997), the Unified Agreement for the Investment of Arab
Capital in the Arab States (1980) and the Investment Agreement of the Organization of the
Islamic Conference (1981). In one case, the claimants relied on four legal instruments at once,
including the WTO General Agreement on Trade in Services (GATS). This is the first known ISDS
case invoking GATS as a basis for the tribunal’s jurisdiction.19
Measures challenged
Overall outcomes
UNCTAD’s advocacy for systemic and sustainable development-oriented reform of the IIA regime started in 2010. It covers all three pillars of
UNCTAD’s activities: research and policy analysis, technical assistance and intergovernmental consensus building.
In terms of policy research and policy development:
• WIR10 built on UNCTAD’s long-standing experience with its Work Programme on IIAs and highlights the need to reflect broader policy
considerations in IIAs, with a view to formulating new generation investment policies.
• WIR12 launched UNCTAD’s Investment Policy Framework for Sustainable Development, which offers guidance and options for modernizing
investment policies at national and international levels.
• WIR13 responded to concerns about the ISDS system and proposes five paths of reform for investor-State arbitration, building on
UNCTAD’s longstanding human and institutional capacity building work on managing ISDS in developing countries. In fact, as early as
2009 UNCTAD spearheaded the possibility of establishing an Advisory Facility on International Investment Law and ISDS for Latin America.
• WIR14 presented four pathways of reform for the IIA regime that were emerging from State practice. WIR14 linked these pathways to the
overall objective of mobilizing foreign investment and channelling it to key SDG sectors.
• WIR15 laid out a comprehensive Road Map for IIA Reform.
• In July 2015, an update of the Investment Policy Framework was launched at the Third UN Conference on Financing for Development, in
Addis Ababa (UNCTAD, 2015c).
• In 2016, UNCTAD launched its Action Menu for Investment Facilitation, based on its 2012 Policy Framework and its 2008 study on
investment promotion provisions in IIAs. The Action Menu also draws on UNCTAD’s rich experiences and lessons learned in investment
promotion and facilitation efforts worldwide over the past decades.
The catalytic role of UNCTAD’s work on IIA reform is evident from a stakeholder survey conducted at the end of 2015:
• Roughly half of the respondents confirmed that the UNCTAD Policy Framework had triggered policy change or reform actions in their
countries.
• More than 60 per cent of respondents noted that UNCTAD’s work on investment policymaking for sustainable development is reflected in
their country’s investment policymaking (e.g. a model IIA or recently concluded treaties).
• About 85 per cent of respondents considered UNCTAD’s Road Map for IIA Reform to be highly relevant.
Source: ©UNCTAD.
Regional
Act at all levels Ensuring Reforming
Enhancing
responsible investment
systemic
investment dispute
consistency
Sequence properly settlement
Bilateral
Source: ©UNCTAD.
b. National level
Numerous countries are reviewing their IIA network and/or developing a new treaty model.
Frequently, their actions are based on UNCTAD policy guidance.
National-level reform options include national IIA reviews and action plans resulting, among
others, in new model treaties. A large number of countries are engaged in national-level reform
activities (box III.5).
About 100 countries, including those that undertook a review as part of the REIO they are a
member of, have used the UNCTAD Policy Framework when reviewing their IIA networks. About
60 of these have used the UNCTAD Policy Framework when designing their treaty clauses.
National-level IIA reform covering different areas has produced modernized content in recent
model treaties. A review of recent models shows that most of them strive to safeguard the
right to regulate while ensuring protection of investors, as well as to improve investment
dispute settlement. For example, all recent models reviewed refine the definition of investment,
include exceptions to the free transfer of funds obligation and limit access to ISDS. Nine of the
10 models reviewed include a clarification of what does and does not constitute an indirect
expropriation, and 8 models include clauses to ensure responsible investment (e.g. a CSR
clause or a “not lowering of standards” clause), while only 2 models have specific proactive
provisions on investment promotion and/or facilitation (table III.5). The inclusion of specific
reform-oriented clauses in model IIAs – as shown in the table – is not fully indicative of the
scope and depth of the reform aspect in the relevant provision (which can vary from one model
to another) or of the overall extent of reform in the model in question.
Brazil developed a new BIT model focusing on investment promotion and facilitation. The new model has been used in Cooperation and
Facilitation Investment Agreements (CFIAs) concluded with Angola, Chile, Colombia, Malawi, Mexico and Mozambique, and is the basis for
the country’s negotiations with Peru.
Canada continuously updates its IIA policy on the basis of emerging issues and arbitral decisions. Most recent changes (set out in the legal
review of the Canada-EU Comprehensive Economic and Trade Agreement (CETA)) include stronger provisions on the right to regulate and the
creation of a new Investment Court System (ICS) (box III.6).
Colombia is reviewing its 2011 model BIT. The review is expected to continue the earlier trend of strengthening the right to regulate and
ensuring responsible investment.
Egypt’s updated model BIT is awaiting release after a comprehensive review that involved all concerned stakeholders. The update aims
to balance investment protection and the State’s right to regulate and includes provisions on combating corruption, SDG consideration,
investors’ responsibilities and a refined ISDS mechanism.
India approved a new model BIT which includes a chapter on investor obligations, requiring investors to comply with host State legislation and
voluntarily adhere to internationally recognized standards of corporate social responsibility (CSR). In addition, it includes an ISDS mechanism
that provides, amongst others, for exhaustion of local remedies prior to commencing arbitration and strict timeframes for the submission of
a dispute to arbitration.
Indonesia’s draft model BIT is being finalized. The draft version is characterized by carve-outs, safeguards and clarifications aimed at striking
a balance between the right of the State to regulate and the rights of investors, while maintaining its policy space.
The Netherlands has recently reviewed its international investment policy engagement. This resulted in a decision to revise the current
portfolio of Dutch IIAs, subject to consultations with concerned stakeholders and the authorization of the European Commission.
Mongolia established a working committee in January 2016 to develop a new BIT model that aligns its IIA policy with its national laws and
development strategy. Mongolia will then embark on amending or renegotiating its previous BITs with partner countries to align them with
the model.
Norway’s draft model BIT was presented for public consultation in May 2015. With more than 900 inputs received, the review is ongoing. The
draft model contains a clause on the right to regulate and a section with exceptions, including general exceptions and exceptions for essential
security interests, cultural policy, prudential regulations and taxation.
South Africa is reshaping its investment policy in accordance with its objectives of sustainable development and inclusive economic growth.
The country adopted a new Promotion and Protection of Investment Act (see also section III.1).
Slovakia’s new model BIT, adopted in 2014 and currently available in its draft 2016 version, introduced a number of provisions aimed at
balancing investment protection while maintaining the right to regulate. It is a “living document” based on the country’s experience with
investment arbitrations and follows the EU’s new investment approach.
Switzerland regularly updates its model BIT provisions (most recently in 2012). In February 2015 an interdepartmental working group took
up its work to review provisions where necessary.
The United States’ 2012 model BIT builds on the country’s earlier model from 2004 and benefited from inputs from Congress, private sector,
business associations, labour and environmental groups and academics (ongoing review).
Source: ©UNCTAD, based on UNCTAD (2016).
c. Bilateral level
The most prominent bilateral reform action is the negotiation of new IIAs. Most of the recently
concluded treaties include sustainable-development-friendly clauses.
Newly concluded IIAs display important reform-oriented provisions and represent the most
prominent reform action at the bilateral level. Other bilateral-level reform actions include joint
IIA consultations and plans for a joint course of action. Another action, a joint IIA review, aims to
take stock of the situation and assess the impact and the risks of the bilateral IIA relationship,
and to identify reform needs. The review is undertaken bilaterally and can result in joint
interpretations by the contracting parties of a treaty, as well as renegotiations, amendments
and the conclusion of new IIAs.
1 2 3 4 5 6 7 8 9 10 11
Austria Model BIT (2008)
Azerbaijan Model BIT (2016)
Brazil Model CFIA (2015)
Canada Model BIT (2014)
Egypt draft Model BIT (2015)
India Model BIT (2015)
Serbia Model BIT (2014)
Slovakia draft Model BIT (2016)
Turkey draft Model BIT (2016)
United States Model BIT (2012)
The scope and depth of commitments in each provision varies from one IIA to another. Yes No Not applicable
1 References to the protection of health and safety, labour rights, 6 Omission of the so-called “umbrella” clause
environment or sustainable development in the treaty preamble
7 General exceptions, e.g. for the protection of human, animal or
2 Refined definition of investment (e.g. reference to characteristics plant life or health; or the conservation of exhaustible natural
of investment; exclusion of portfolio investment, sovereign debt resources
obligations or claims to money arising solely from commercial
contracts) 8 Explicit recognition that parties should not relax health, safety or
environmental standards to attract investment
3 Circumscribed fair and equitable treatment (equated to the
minimum standard of treatment of aliens under customary 9 Promotion of Corporate and Social Responsibility standards by
international law and/or clarification with a list of State obligations) incorporating a separate provision into the IIA or as a general
reference in the treaty preamble
4 Clarification of what does and does not constitute an indirect
expropriation 10 Limiting access to ISDS (e.g. limiting treaty provisions subject
to ISDS, excluding policy areas from ISDS, limiting time period to
5 Detailed exceptions from the free-transfer-of-funds obligation, submit claims, no ISDS mechanism)
including balance-of-payments difficulties and/or enforcement of
national laws 11 Specific proactive provisions on investment promotion and/or
facilitation
Source: ©UNCTAD. “Draft” model means that the model has not been adopted by the country yet or that it is continually being updated.
d. Regional level
Regional-level IIA reform actions can have significant impacts. They can expand the use of
modern IIA clauses and help consolidate the existing treaty network.
Regional-level IIA reform actions include collective treaty reviews and IIA action plans, which
can result in common IIA models, joint interpretations, renegotiations, and/or the consolidation
of treaties. A regional IIA model can significantly contribute to IIA reform by guiding a block of
countries (instead of a single one) and regional organizations, and by influencing negotiations
of megaregional agreements. Megaregional agreements could consolidate and streamline the
IIA regime and help enhance the systemic consistency of the IIA regime, provided they replace
prior bilateral IIAs between the parties (WIR14).
Regional reform-oriented action is prevalent in Africa, Europe and South-East Asia.
In Africa the African Union (AU) is working on the development of a Pan-African Investment
Code (PAIC), which is expected to include innovative provisions aimed at balancing the rights
and obligations of African host States and investors.
Modern IIA elements are also expected to be included in the second phase of negotiations of
the African Continental Free Trade Agreement (CFTA)22 as well as in the revision of the Common
Market for Eastern and Southern Africa (COMESA) Investment Treaty (2007).
A draft regional model for the East African Community (EAC) was submitted to the Sectoral
Council on Trade, Industry, Finance and Investment for adoption and guidance in autumn 2015.
The model includes carefully drafted national treatment and most-favoured-nation provisions,
and replaces FET with a provision focusing on administrative, legislative and judicial processes.
The Southern African Development Community (SADC) member States are reviewing the 2012
Model Bilateral Investment Treaty Template, as contemplated when the model was completed.
The model, launched shortly after the UNCTAD Policy Framework, contains numerous reform-
oriented features. SADC is also revising Annex 1 of its Protocol on Finance and Investment with
refinements to the definition of investment, clarifications to FET and a provision on the right
to regulate. In addition, SADC is in the final stages of developing a Regional Investment Policy
Framework (IPF).
In Asia, between 2008 and 2014, the Association of Southeast Asian Nations (ASEAN) concluded
five TIPs with third parties (India, China, the Republic of Korea, Australia and New Zealand, and
Japan, in chronological order) that include reform-oriented provisions. Reform aspects relate,
for instance, to the granting of special and differential treatment to ASEAN member States, in
recognition of their different levels of economic development, through technical assistance and
1 2 3 4 5 6 7 8 9 10 11
Angola–Brazil CFIA
Australia–China FTA
Azerbaijan–San Marino BIT
Brazil–Chile CFIA
Brazil–Colombia CFIA
Brazil–Malawi CFIA
Brazil–Mexico CFIA
Brazil–Mozambique CFIA
Burkina Faso–Canada BIT
Cambodia–Russian Federation BIT
China–Republic of Korea FTA
Denmark–Macedonia FYRO BIT
Guinea-Bissau–Morocco BIT
Honduras–Peru FTA
Japan–Mongolia EPA
Japan–Oman BIT
Japan–Ukraine BIT
Japan–Uruguay BIT
New Zealand–Republic of Korea FTA
Republic of Korea–Turkey Investment Agreement
Republic of Korea–Viet Nam FTA
The scope and depth of commitments in each provision varies from one IIA to another. Yes No Not applicable
1 References to the protection of health and safety, labour rights, 6 Omission of the so-called “umbrella” clause
environment or sustainable development in the treaty preamble
7 General exceptions, e.g. for the protection of human, animal or
2 Refined definition of investment (e.g. reference to characteristics plant life or health; or the conservation of exhaustible natural
of investment; exclusion of portfolio investment, sovereign debt resources
obligations or claims to money arising solely from commercial
contracts) 8 Explicit recognition that parties should not relax health, safety or
environmental standards to attract investment
3 Circumscribed fair and equitable treatment (equated to the
minimum standard of treatment of aliens under customary 9 Promotion of Corporate and Social Responsibility standards by
international law and/or clarification with a list of State obligations) incorporating a separate provision into the IIA or as a general
reference in the treaty preamble
4 Clarification of what does and does not constitute an indirect
expropriation 10 Limiting access to ISDS (e.g. limiting treaty provisions subject
to ISDS, excluding policy areas from ISDS, limiting time period to
5 Detailed exceptions from the free-transfer-of-funds obligation, submit claims, no ISDS mechanism)
including balance-of-payments difficulties and/or enforcement of
national laws 11 Specific proactive provisions on investment promotion and/or
facilitation
Source: ©UNCTAD.
Note: Based on bilateral IIAs concluded in 2015 for which the text is available; does not include “framework agreements” without substantive investment provisions. Available IIA texts
can be accessed at UNCTAD’s IIA Navigator at http://investmentpolicyhub.unctad.org/IIA.
Most-favoured-nation treatment
4.2.2 3% 33%
Specify that such treatment is not applicable to other IIAs’ ISDS provisions
Indirect expropriation
4.5.1 20% 53%
Clarify what does and does not constitute an indirect expropriation
capacity building or to the promotion and facilitation of investment through specific and well-
defined activities.
In Europe, much policy attention has been given by the European Commission to developing
a new approach to investment protection, with a particular emphasis on the right to regulate
and the establishment of a permanent investment court (box III.6). This new approach was
implemented in the EU–Viet Nam FTA (negotiations concluded in December 2015) and the
Canada–EU CETA (legal review concluded in February 2016).
In the trans-Pacific context, the investment chapter of the 12-party TPP, which builds on the
2012 United States model BIT, contains a number of reform-oriented features. For example, it
includes provisions to ensure the right of governments to regulate in the public interest, including
on health, safety and environmental protection; and an ISDS mechanism with safeguards to
prevent abusive and frivolous claims. In addition, several contracting parties have made use of
side letters to clarify, reserve or carve out certain issues, including with respect to ISDS.
Finally, regional agreements have the potential to consolidate the IIA regime if the parties opt to
phase out the BITs between them (WIR14). Conversely, the parallel existence of existing BITs and
any subsequent regional agreements poses a number of systemic legal and policy questions,
adds to the “spaghetti bowl” of intertwined treaties and complicates countries’ abilities to pursue
coherent, focused international engagement on investment policy issues (WIR13). The EU–Viet
Nam FTA overlaps with 21 BITs (between EU member States and Viet Nam), while the CETA
overlaps with 7 BITs (between EU member States and Canada), respectively. The TPP overlaps
with 39 bilateral or regional IIAs among TPP parties. Although the new EU FTAs are expected to
In 2015, the EU set out its new approach to substantive IIA clauses and ISDS. A key feature of this new approach is the establishment in all
EU trade and investment agreements of a new Investment Court System (ICS), consisting of a first instance tribunal and an appeal tribunal,
both composed of individuals appointed as “judges” by the contracting parties and subject to strict ethical standards.
This new approach has since been implemented with some slight variations, in the EU–Viet Nam FTA (for which negotiations were concluded
in December 2015), and in the CETA (February 2016 text emanating from the legal review, following the conclusion of negotiations in 2014).
The proposal has also been submitted by the EU to the negotiations for the TTIP (November 2015) and is part of ongoing EU negotiations
with a number of other countries.
The ICS proposal is designed to
• Improve legitimacy and impartiality, by establishing in each EU trade and investment agreement an institutionalized dispute settlement
system with independent and permanent judges
• Enhance the consistency and predictability of law, including by introducing an appeals facility, with the power to review with an eye to
annul and/or correct a first-instance decision, on the basis of errors in the application or interpretation of applicable law, manifest errors
in the appreciation of the facts, or ICSID grounds for annulment
Some critics note, however, that the ICS maintains a number of aspects of the current ISDS system and does not go far enough in addressing
ISDS-related concerns. Others point to a number of potential challenges:
• Procedural challenges, such as those relating to efficiency, ease of access, and choice, appointment and remuneration of judges
• Systemic challenges, such as those relating to interpretative coherence
• Development challenges, e.g. how to ensure that “rule-taking” States are not overburdened by multiple coexisting dispute settlement
mechanisms such as ICS and ISDS in their IIAs
The ICS is an important ISDS reform option that represents a critical step towards improving the dispute settlement system. Although it
addresses a number of key concerns about ISDS, for the ICS to become fully operational and effective, a number of procedural and systemic
challenges will need to be overcome.
Moreover, as part of its overall policy approach, the EU has also proposed to pursue with interested countries the establishment of a future
Multilateral Investment Court to replace the existing ISDS mechanisms in current and future IIAs. The objective would be to address systemic
challenges resulting from the current coexistence of multiple dispute settlement systems, such as interpretative coherence across IIAs, issues
of cost efficiency and the legitimacy of the investment dispute settlement system.
Source: ©UNCTAD, based on UNCTAD (2016) as well as the September 2015 EU Internal Proposal, the November 2015 EU TTIP Proposal to the United States, the February
2016 EU–Viet Nam FTA text and the February 2016 CETA (revised) text.
replace existing IIAs between EU member States and the other parties, the TPP does not include
provisions on the termination of existing IIAs between the 12 parties.23
e. Multilateral level
Stepping up multilateral reform activities can help avoid fragmentation and ensure that reform
efforts deliver benefits to all stakeholders.
Multilateral IIA reform is the most challenging reform dimension. The UNCTAD Road Map
identifies several possible options for multilateral IIA reform with different levels of intensity,
depth and character of engagement. Extensive and in-depth discussions have been conducted
at UNCTAD, and certain reform actions are being undertaken in UNCITRAL and the UN
Human Rights framework. In addition, international organizations traditionally less focused on
international investment policymaking (e.g. the United Nations Environment Programme, the
World Health Organization Framework Convention on Tobacco Control) have started to look at
IIA reform within their respective areas of competence.
The importance of multilateral consultations on IIAs in the pursuit of today’s sustainable
development agenda has been recognized in the Addis Ababa Action Agenda, the outcome
document of the Third UN Conference on Financing for Development, held in July 2015. In the
f. Concluding remarks
UNCTAD’s 2016 World Investment Forum offers the opportunity to discuss how to carry IIA
reform to the next level.
The overview suggests that sustainable development-oriented IIA reform has entered the
mainstream of international investment policymaking:
• Numerous countries are engaging in national-level reform actions and implementing the
results in bilateral negotiations and new treaties.
• Most of today’s new IIAs include refined language that aims to preserve the right to
regulate while maintaining protection of investors, as well as at improving the existing ISDS
mechanism (with several treaties omitting the international arbitration option altogether).
• Innovative ideas for improving investment dispute settlement define today’s discourse on IIA
reform and are making their way into new IIA negotiations.
During this first phase of IIA reform, countries have built consensus on the need for reform,
identified reform areas and approaches, reviewed their IIA networks, developed new model
treaties and started to negotiate new, more modern IIAs. Despite significant progress, much
remains to be done.
First, comprehensive reform requires a two-pronged approach: modernizing existing treaties
and formulating new ones. Although new treaty design is yielding important results for IIA
regime reform, dealing with the existing stock of IIAs remains the key challenge. This holds
especially true for developing countries and least developed countries.
Second, reform has to address the challenge of increasing fragmentation. Although the
continuing experimentation in treaty making is beneficial, ultimately only coordinated activity at
all levels (national, bilateral and regional, as well as multilateral) will deliver an IIA regime in which
stability, clarity and predictability serve the objectives of all stakeholders: effectively harnessing
international investment relations for the pursuit of sustainable development. In the absence
of such a coordinated approach, the risk is that IIA reform efforts will become fragmented
and incoherent.
Unlike the first phase of IIA reform, in which most activities took place at the national level,
phase two of IIA reform will require countries to intensify collaboration and coordination
between treaty partners to address the systemic risks and incoherence of the large body of old
treaties. UNCTAD stands ready to provide the investment and development community with the
necessary backstopping in this regard. UNCTAD’s Road Map for IIA Reform and its Action Menu
on Investment are key guidance for reform. UNCTAD’s 2016 World Investment Forum offers the
opportunity to discuss how to carry IIA reform to the next level.
Facilitating investment is crucial for the post-2015 development agenda. To date, national and
international investment policies have paid relatively little attention to investment facilitation.
UNCTAD’s Global Action Menu for Investment Facilitation provides options to adapt and adopt
for national and international policy needs. Any investment facilitation initiative cannot be
considered in isolation from the broader investment for development agenda.
Facilitating investment is crucial for the post-2015 development agenda, with developing
countries facing an annual SDG-financing gap of $2.5 trillion (WIR14). Facilitating investment is
also one of the five areas of reform outlined in the UNCTAD Road Map.
Investment promotion and facilitation work hand in hand. However, they are two different types
of activities. One is about promoting a location as an investment destination (and is therefore
often country-specific and competitive in nature), while the other is about making it easy for
investors to establish or expand their investments, as well as to conduct their day-to-day
business in host countries.
Investment facilitation covers a wide range of areas, all with the ultimate objective of attracting
investment, allowing investment to flow efficiently, and enabling host countries to benefit
effectively. Transparency, investor services, simplicity and efficiency of procedures, coordination
and cooperation, and capacity building are among the important principles. It interacts at all
stages of investment, from the pre-establishment phase (such as facilitating regulatory feasibility
studies), through investment installation, to services throughout the lifespan of an investment
project. To date, however, national and international investment policies have paid relatively little
attention to investment facilitation.
At the national level, many countries have set up policy schemes to promote foreign investment.
Between 2010 and 2015, at least 173 new investment promotion and facilitation policies were
introduced around the world. Almost half of these measures related to investment incentives,24
followed by special economic zones25 and only 23 per
cent related to investment facilitation specifically26
(figure III.10). Categories of promotion
Figure III.10. and facilitation policies,
Overall, the number of investment facilitation measures 2010–2015 (Per cent)
adopted by countries over the past six years remains
relatively low compared with the numbers of other Other 2
investment promotion measures. In addition, only
Investment
about 20 per cent of the 111 investment laws analyzed facilitation
by UNCTAD deal with specific aspects of investment 23
facilitation, such as one-stop shops.
Investment
incentives 48
At the international level, in the most common
international instruments for investment, relatively little
27
attention is being paid to ground-level obstacles to Special
economic zone
investment, such as a lack of transparency on legal
or administrative requirements faced by investors, lack
of efficiency in the operating environment and other Source: ©UNCTAD, Investment Policy Monitor Database.
Action line 5 proposes designating a lead agency or investment facilitator with a mandate to,
e.g.:
• Address suggestions or complaints by investors and their home states.
• Track and take timely action to prevent, manage and resolve disputes.
• Provide information on relevant legislative and regulatory issues.
• Promote greater awareness of and transparency in investment legislation and procedures.
Inform relevant government institutions about recurrent problems faced by investors which
may require changes in investment legislation or procedures.
Action line 6 suggests establishing monitoring and review mechanisms for investment facilitation:
• Adopt diagnostic tools and indicators on the effectiveness and efficiency of administrative
procedures for investors to identify priority areas for investment facilitation interventions.
• Benchmark and measure performance of institutions involved in facilitating investment or
in providing administrative services to investors, including in line with international good
practices.
Action line 7 advocates enhancing international cooperation for investment facilitation. Possible
mechanisms include the following:
• Establish regular consultations between relevant authorities, or investment facilitation
partnerships, to
Monitor the implementation of specific facilitation measures (e.g. related to dismantling
bureaucratic obstacles).
Address specific concerns of investors.
Design, implement and monitor progress on investment facilitation work plans.
• Collaborate on anti-corruption in the investment process.
• Arrange for regulatory and institutional exchanges of expertise.
Investor
Nationality:
Policy
Challenges
A. Introduction:
the investor nationality
conundrum
1. Complex ownership and investor nationality
Firms, and especially affiliates of multinational enterprises (MNEs), are often controlled through
hierarchical webs of ownership involving a multitude of entities. More than 40 per cent of
foreign affiliates are owned through complex vertical chains with multiple cross-border links
involving on average three jurisdictions. Corporate nationality, and with it the nationality of
investors in and owners of foreign affiliates, is becoming increasingly blurred.
Complex corporate structures have become increasingly notorious in recent years. They
feature prominently in the debate on tax avoidance by MNEs, because investment schemes
involving offshore financial centres, special purpose entities and transit FDI have proved to
be an important tool in MNE tax minimization efforts (WIR15). They are also central to the
discussion on illicit financial flows because they enable, channel or launder the proceeds of tax
evasion, corruption or criminal activities. As a result, complex ownership structures are at times
portrayed as suspect and contrary to good corporate governance practices.
At the same time, with the increasing integration of the world economy and the growth of global
value chains (GVCs, see WIR13) the international production networks of MNEs have become
more and more complex. This growing complexity is inevitably reflected in corporate structures.
• MNEs see continued growth. They exploit economies of scale and scope and competitive
advantages over smaller rivals to expand, enter new markets, and add new businesses,
often at a rapid pace.
• The increasing fragmentation of production in GVCs leads MNEs governing such chains to
break up their business in smaller parts in order to place each part in the most advantageous
location, or to dispose of certain parts deemed non-core and focus on others.
• Modern production methods require component parts of production networks to be nimble
and to engage with third parties in non-equity relationships, joint ventures, or other forms
of partnership.
• The dynamics of global markets are further causing MNEs to frequently reassess their
portfolio of activities and engage in mergers and acquisitions (M&As), often causing affiliates
to change hands, moving from one corporate structure to form part of another.
The result is ever “deeper” corporate structures (with affiliates ever further removed from
corporate headquarters in chains of ownership), dispersed shareholdings of affiliates (with
individual affiliates being owned indirectly through multiple shareholders), cross-shareholdings
(with affiliates owning shares in each other), and shared ownerships (e.g. in joint ventures).
It follows that complexity in corporate structures is often the result of growth, fragmentation,
partnerships, and M&As, and not necessarily in and of itself a sign of corporate malfeasance.
Nonetheless, MNEs will endeavour to affect any change in ownership structures in the most
advantageous manner possible, especially from a fiscal and risk management perspective.
They may thus add further elements of complexity to any transaction. Thus, business- and non-
business-driven elements of complexity in corporate structures often go hand in hand and can
be difficult to separate.
100 44
Blurring of investor
nationality…
Share at 60% for foreign
affiliates of largest MNEs
56 15
41
Economic weight:
~50%
Average number of
countries in ownership
chains: 2.5
Past editions of WIR have dealt with various aspects of governance in international production by MNEs, including integrated international
production networks (WIR93) and GVCs (WIR13), and with governance modalities, including numerous non-equity modes (WIR11). Governance
in international production refers to the ability of MNEs to coordinate activities, flows of goods and services, and access to tangible and
intangible assets across disparate networks of firms, including their own affiliates as well as partners, suppliers and service providers.
A common approach to studying control in such networks revolves around the question of what to own (and what not to own). Which tangible
and intangible assets should be held strictly under MNE control through ownership, and which can be shared. Which activities should be
done in-house, which can be outsourced (make or buy). These questions are at the heart of the concepts of ownership and internalization
advantages in the economic theory of international production.
Different governance levers (including non-ownership levers) in international production and GVCs, such as contracts, licenses and technology,
access to markets, bargaining power, and the like have important implications for investment and development policy. However, the focus
in this chapter is not on the question of what to own, but how to own it. Given the affiliates that an MNE owns, how do MNEs structure the
ownership of affiliates, i.e. through direct shareholding by the parent company, through indirect shareholdings and intermediate subsidiaries,
through multiple ownership links, or through joint or cross-shareholdings.
The chapter thus examines ownership and imputed control as concepts in investment rules and in IIAs, focusing on formal shareholdings and
control as a corporate governance concept, i.e. the legal rights to an asset and the income derived from it, the right to make strategic and
capital allocation decisions, and the right to dispose of the asset.
Source: ©UNCTAD.
• The chapter distinguishes ownership and control to indicate the difference between direct
shareholdings in foreign affiliates and ultimate ownership or control within MNE corporate
structures, taking into account indirect ownership links and chains, and joint and cross-
shareholdings. The focus is therefore on control within the boundaries of MNEs. Clearly,
looking more broadly at the concepts of ownership and control in international production
networks there are other, non-equity levers of control, which have been the subject of
past WIRs (see box IV.1, as well as WIR11 and WIR13). The common theme of these past
research efforts concerns the governance of international production and the separation of
ownership and control. This chapter focuses on formal equity ownership links and refers
to past WIRs for policy implications regarding the governance of international production.
• The chapter focuses specifically on those aspects of ownership and control in MNEs that are
relevant from an investment policy perspective, i.e. on elements of complexity in corporate
structures that alter perspectives on the origin of investors (or that make it more difficult to
establish origin), and the attendant consequences. It does not aim to provide an exhaustive
account of the implications of different types of ownership structures for tax, illicit financial
flows or competition policies (although some investment-related policy areas are discussed).
The structure of the remainder of the chapter is as follows:
Section B provides a glossary of ownership complexity and insights on ownership structures in
MNEs taking a “top-down” perspective, looking at entire corporate structures from the parent
company down. This section also aims to identify the drivers and determinants of MNE ownership
structures, i.e. the key factors behind management decisions regarding shareholding structures
within corporate groups. The determinants of ownership structures also allow some inferences
about the likely future evolution of MNE ownership complexity.
Section C changes the perspective and takes a “bottom-up” approach, looking at ownership
chains from foreign affiliates up to their ultimate owners or parents, in order to show how
investor nationality can become blurred if complex ownership of investments is taken into
account. This section contains the key analytical results from a detailed study of firm-level
data on some 4.5 million companies and more than 700,000 foreign affiliates, using Bureau
Scope of WIR16
PARENT COMPANY A
HOME COUNTRY
50%
100% 40%
50%
AFFILIATE F AFFILIATE G
HOST COUNTRY 100% HOST COUNTRY 100% 30%
15% 15%
<10%
AFFILIATE M
HOST COUNTRY 60%
Portfolio Participation
affiliate and ultimate not directly owned large MNEs are not
owner (hierarchical by their ultimate directly owned by
distance >1) owner; 40% of FAs their ultimate owner;
have direct owners 60% of FAs have
Cross-border Long ownership Jurisdiction of the
and ultimate direct owners and
ownership chains chains with multiple direct owner differs
owners in different ultimate owners in
cross-border steps from that of ultimate
jurisdictions different jurisdictions
and entities in owner: nationality
multiple jurisdictions mismatch
Multiple Affiliate is controlled MNE parent control
ownership through multiple over affiliates
within MNE stakes held by other based on complex 90% of FAs have 75% of affiliates
Horizontal complexity
group entities that add network relationships a single majority of large MNEs have
up to a majority stake between affiliates shareholder a single majority
shareholder; 25% are
Joint ventures with Two or more Definition of a
controlled through
external partners shareholders from unique controller
multiple entities
different groups jointly is challenging;
within the group
own all or a majority control can be
of shares of an entity achieved through
dominant stakes or
voting coalitions
Ownership hubs One entity in the MNE Ownership hubs
Other elements of complexity
owner, actually control affiliates can be higher or lower than the number of shares held. In the
stylized example above, nominal ownership percentages differ from actual control of voting
rights only in one case (D, G, K) owing to a relatively simple cross-shareholding structure.
However in extreme cases, complex cross-shareholding links may confer control even with very
limited nominal stakes, as shown in figure IV.5.
Beyond cross-shareholdings, there are principally two other cases in which ownership-based
control can differ from nominal equity stakes:
• Departures from the one-share-one-vote principle. Actual degrees of control can be made
completely independent of the distribution of shareholdings through the use of nonvoting
shares, preferential or dual classes of shares, multiple voting rights, golden shares,
voting-right ceilings and similar constructions.2 This phenomenon is difficult to include in
the analysis in this chapter, as data on preferential shares is not systematically available.
ARMINDO CARVALHO DO VALE LUIS FILIPE CARVALHO VALE JOSE JOAQUIM CARVALHO VALE
33.33% 33.33% 33.33%
2% 2% 2%
95%
24%
5%
5%
31.0%
28.1%
21.7%
20.2%
9.8% 10%
6.7%
4% 1.3%
0.6% 0.1%
Source: ©UNCTAD analysis based on Orbis data (November 2015); adapted and updated from Altomonte and Rungi (2013).
Note: Based on a sample of 320,000 MNEs with at least one affiliate abroad: total affiliates are 1,116,000, of which 774,000 foreign. Estimates for value added are based on 220,000
affiliates and unconsolidated financial accounts. The perimeter of 320,000 MNEs is a globally representative universe resulting from a massive extraction of firm-level information
from Orbis (based on an initial sample of 22 million firms reporting ownership information) after several computational and cleaning steps. The identification of the MNE corporate
boundaries, and the computational effort of mapping a total of nearly 40 million ownership links, uses the algorithmic approach developed in Rungi et al. (2016).
40 000
(~75%)
Because the scope for complexity is highest in the largest MNEs with the most affiliates, it can
be assumed that the level of complexity found in the Top 100 represents the extreme end of
the scale.
Ownership links between affiliates that transact with Mainly drives vertical complexity and
Operational logic each other in supply chains and/or that are part of hubs; can affect shared ownership of
regional or industry sub-groups within MNE structures affiliates
In reaction to the Russian Federation’s policy on the Ukraine, the EU, the United States and other countries adopted restrictive measures
against several Russian individuals and entities in order to restrict investment and business owned or controlled by blacklisted Russian
persons (individuals/entities).
Bank Rossiya (Russian Federation) was put on the list of those companies to which the restrictive measures would apply on 20 March 2014.
Before March 2014, 51 per cent of the insurance company Sogaz belonged to Rossiya through a wholly owned subsidiary called Abros.
Therefore, under the rules, Sogaz would have fallen under the restrictive measure as an entity that is majority-owned by an affected party.
But Rossiya transferred a 2.5 per cent stake to Sogaz Realty, a subsidiary of Sogaz itself, the week before the restrictive measures were
imposed. With Rossiya’s stake now below 50 per cent, Sogaz announced that it was not subject to restrictive measures. The transaction let
Sogaz avoid restrictive measures because a firm controlled by several affected entities was not itself subject to restrictive measures if none
of them individually owned 50 per cent of it.
Subsequently, the United States issued a new rule on 13 August 2014, which provides among other things that a firm is blacklisted if the
stakes of affected individuals add up to 50 per cent or more. The EU has a similar rule. Under the new rules, Sogaz should have been subject
to restrictive measures because of its links to both Bank Rossiya and Kordeks, a 12.5 per cent shareholder reportedly controlled by another
person, whom the United States had blacklisted several months earlier. However, Rossiya cut its stake two days before the issuance of the
new rules, to the effect that Sogaz avoided restrictive measures once more.
Sogaz announced in late August 2014 that Abros held only 32.3 per cent of its stake, following a transaction which had taken place on 6
August and been registered on 11 August, just before the issuance of the new rules on 13 August. Gazprom, on its part, offloaded 16.2 per
cent of its stake in its subsidiary. This brought Sogaz’s total stake in the affected parties to 44.8 per cent (Abros 32.3 per cent, Kordeks 12.5
per cent), well below the threshold.
Source: The Economist, 14 February 2015.
MNE-specific drivers
Many MNEs grow haphazardly and opportunistically. Early in the development of an MNE,
affiliates are more likely to be established in the home and neighbouring countries. Affiliates in
those neighbouring countries might grow and, being familiar with their surrounding markets,
might capture opportunities in those markets. The MNE might spread at a regional level, before
spreading its wings in other regions in the world. At each level, it is likely to be nearby affiliates
that play a role in identifying opportunities for growth (whether through greenfield investment
or by acquisition), in setting up the new operation, in arranging financing and legal status, and
in supplying initial-phase directors. As a result, a series of pictures taken over time of an MNE’s
ownership structure might resemble the growth of mushrooms, first in a nearby circle, and then
expanding in intersecting circles. (The same logic of geographical expansion might be applied
to business lines in divisional structures.)
Despite the fact that ownership structures, especially at the affiliate level, can be changed over
time – and as MNEs grow larger and more complex, they do change them – growth patterns
and historic coincidence do appear to explain a significant part of the ownership complexity
story. For example, the median age of affiliates of the Top 100 MNEs decreases at each rung
of the hierarchy ladder.8 This is most likely explained by the fact that affiliates at each level are
involved in setting up affiliates at the next level. Therefore, hierarchical levels are not generally
constructed artificially with new affiliates being inserted mid-way, or multiple affiliates being
created simultaneously according to a pre-planned scheme.
Administrative heritage is a well-researched phenomenon that can explain the gradual
“sedimentation” of layers of ownership in MNEs.9 Systematic restructuring and rationalization
of the ownership structure of an MNE can be costly, mostly because changes in ownership
structures would normally require actual transactions (the sale and purchase of shares) to take
place, potentially triggering capital gains taxes in addition to other taxes and transactions costs.
Table IV.4. Evolution of internationalization statistics for the top 100 MNEs
(Index 1995 = 100)
Memorandum
World GDP 100 109 153 213 252
World Gross Fixed Capital Formation 100 108 154 213 265
Source: ©UNCTAD analysis.
Note: Trends on Top 100 MNEs are derived from UNTAD’s WIR (different years); data on GDP and GFCF are from IMF (2015).
Global
ultimate Ultimate shareholder level
owner 50+
50+
50+
Direct
owner First shareholder level
50+
Source: ©UNCTAD.
Note: “50+” indicates a majority ownership link.
The firm-level database constructed for the bottom-up analysis of MNE ownership structures in WIR16 is based on Bureau van Dijk’s
Orbis database, the largest and most widely used database of its kind, covering 136 million active companies (at the time of extraction, in
November 2015) across more than 200 countries and territories, and containing firm-level data sourced from national business registries,
chambers of commerce and various other official sources.
The overall Orbis dataset was narrowed down to various subsets needed for different analytical purposes, and to a final dataset on
4.5 million companies, through a series of steps (see box figure IV.3.1).
/...
Step 1: Extraction of companies with ownership information. This step (the initial data extraction from Orbis) captures all companies that
have at least one reported shareholder with a non-zero stake. In the process, it removes branches and nearly all sole traders and
proprietorships, as well as filtering out companies for which information is missing.
Step 2: Companies with full shareholder information. This step cleans the dataset to include only companies with complete information on
location and stakes of direct shareholders, and a sum of direct shares above 50 per cent (for about 80 per cent of selected companies
the aggregate share is 100 per cent).
Step 3: Companies belonging to corporate groups. This step selects companies that have shareholders of the following types only: corporate
industrial, corporate financial, foundations/nonprofit, and public entities. It removes companies with individual or family shareholders
and any remaining self-employed and marginal groups.
Step 4: Companies with a clear corporate global ultimate owner. This step narrows the dataset down to companies that have complete and
consistent information on the GUO and on the path to the GUO (controlling shareholders). The resulting database thus includes a
relatively homogeneous set of companies that have (i) direct corporate shareholders and (ii) full information on direct shareholders
and global ultimate owners. These conditions restrict the perimeter to affiliates of corporate groups, in line with the scope of the WIR.
(Foreign affiliates are a subset of the 4.5 million companies, with direct or ultimate foreign ownership.)
There are some objective limits to the coverage of firm-level information. Despite the fact that Orbis is acknowledged as the most
comprehensive provider of global firm-level information, the coverage in some developing countries, in particular in Africa, is poor, both in
terms of the number of companies reported and in terms of the information available for each company. Some features of the dataset and
analyses employed in this chapter mitigate such coverage issues:
a. Unlike most firm-level studies that focus on financials or operating performance, the analysis here focuses on shareholder information, for
which Orbis coverage is significantly better. For developing countries, almost 1 million companies report complete shareholder information
(shares and location). Of these, only some 150,000 report all key financials (revenues, assets and employment). For Africa, the most
problematic region for data availability, about 40,000 companies report complete shareholder information, only 5,000 of which report any
information on financials.
b. Coverage of shareholder information is much better for companies with corporate shareholders than those with individual and/or family
shareholders. Almost 95 per cent of the corporate-owned companies (with known shareholders) also report information on shares and
location of the shareholders. The share decreases to 60 per cent for family-owned companies.
c. Coverage of companies with foreign shareholders is relatively higher for developing countries than for developed countries (about 50 per
cent of the sample against a global average of 15 per cent). Foreign affiliates are more prominent in the sample of reporting firms in
developing countries because they are generally larger, and because thresholds for reporting tend to be higher (i.e. relatively fewer
domestic companies report). This suggests that the coverage of the database for the purpose of studying foreign affiliates is generally good.
Box figure IV.3.1. Construction of the WIR16 firm-level ownership database based on Orbis
Initial pool WIR16 firm-level Firm-level Corporate Reference
ownership database ownership database ownership perimeter for
after cleaning database bottom-up
analysis
Universe of firms Firms with ownership Firms with full information Firms with Firms with identified
(registered entities)a informationb on direct shareholders corporate direct corporate global
(location and shares) shareholders only ultimate owners
a
Total number of active firms reported by Orbis as of November 2015.
b
For each company the following information was collected: name, location, type, key financials (assets, revenues, employees, value added),
shareholders (SHs) names, SHs stakes, SHs types, SHs location. Availability of data subject to Orbis coverage limitations.
To fully exploit these advantages, the descriptive statistics in this chapter are based mainly on numbers of firms, and carefully calibrated
to avoid interpretations influenced or biased by coverage. For the key results, a revenue-weighted version is also provided, based on the
subsample of companies that report revenues (about 940,000 firms out of the 4.5 million firms in the perimeter of analysis). Revenue figures
used for calculations are in general unconsolidated; consolidated figures are employed only for those firms where unconsolidated ones are
not reported.
Source: ©UNCTAD.
Same country
Domestic direct owner and
426,427 1 foreign ultimate owner
$3.0 mn
Foreign
1 2a 2b
Foreign direct owner and
Different countries 2a foreign ultimate owner
Ultimate owner
4 3
2b Direct owner and ultimate (In most cases the
direct owner is the same
3,749,281 7,903 owner from same country
$1.0 mn $4.7 mn
4 as the ultimate owner)
Domestic Foreign
Yankee Candle, sro YANKEE CANDLE ITALY SRL Yankee Candle Deutschland GmbH
Czech Republic 98% Italy 98% Germany 98%
100%
EMOZIONE SPA
Italy 98%
100%
MILLEFIORI SRL
Italy 98%
100%
STORYTEL AB
Sweden
100% 45%
100% 100%
100%
Barnbolaget i Örebro AB
Sweden 100%
Source: Orbis, T-Rank visualization (March 2016).
Note: The example shows a common MNE ownership structure that combines all three relevant cases (1, 2a and 3) of figure IV.11. Case 1. Rubinstein Audio B.V. is incorporated in
the Netherlands with a domestic direct owner (Storytel NL BV) but a foreign ultimate owner (STORYTELL AB) from Sweden. Case 2a. Storytell NL B.V. has foreign direct owner
(Storytell AG) and a foreign ultimate owner (STORYTELL AB) from different countries, Switzerland and Sweden respectively. Case 3. Storytell Sweden AB has a foreign direct owner
from Switzerland (Storytel AG) and a domestic ultimate owner (STORYTELL AB). Note that all four affiliates at the first hierarchical level in the ownership structure (at hierarchical
distance 1 from the parent) belong to the cases that are less relevant from a policy perspective (either 2b or 4).
All firms
Share in number 7%
1 2a 2b
Ultimate owner
Domestic
Clearly, complex structures are more frequently found in larger MNEs, and their affiliates on
average are larger. The fact that complex structures are a phenomenon of larger MNEs, with
larger affiliates, is clearly illustrated in figure IV.15.
This figure further breaks down the complex cases (1, 2a and 3) in groups ranked by hierarchical
distance from the ultimate owner. The longer the ownership chain from each company to its
ultimate owner, the larger the incidence of complex cases. By definition, the 41 per cent of
complex cases are all found in foreign affiliates with a hierarchical distance higher than 1.
As expected, while the number of companies decreases rapidly with hierarchical distance,
the share of complex cases increases, from an average 74 per cent for foreign affiliates
with a hierarchical distance higher than 1 to 93 per cent of cases for foreign affiliates with a
hierarchical distance above 5. At the same time, the average revenues increase significantly,
which explains why the revenues-weighted average share of complex cases in figure IV.14 is
higher. This appears to belie the notion that the bottom of MNE ownership pyramids would be
populated mostly by smaller companies; the effect (in the data) of belonging to a large corporate
group is evidently stronger than the effect of being placed low in the hierarchy.
The distribution of companies by hierarchical distance indicates that the universe of affiliates is
highly skewed. There is a large number of affiliates with simple ownership links to their parents.
There is an exceedingly small number of affiliates with highly complex ownership paths to their
ultimate owner, with hierarchical depths of more than five levels, but these affiliates account
for a disproportionate share of economic value. This is a general feature of the distribution of
complexity in business groups observed also in other analysis (see for example the distribution
of MNEs by number of affiliates in figure IV.6).
All foreign affiliates Foreign affiliates of the largest MNEs (UNCTAD Top 100)
Mismatch Average number Average revenues Mismatch Average number Average revenues
Share of FAs index of countries (indexed to 100) Share of FAs index of countries (indexed to 100)
Figure IV.16. Direct versus ultimate ownership of foreign affiliates by region (Per cent)
84%
72%
29%
24%
Africa
Latin America
and the Caribbean
Share of direct owners from the region Share of ultimate owners from the region
Only domestic
26 Only foreign
73
Mixed domestic-foreign 70
100
8
17
2
10 8
Total FAs FAs with only one FAs with one foreign FAs with multiple Fragmented Joint ventures
direct owner (100%) majority direct owner ownership ownership
(>50%)
Among the foreign affiliates with fragmented ownership at the direct shareholder level, the
majority would conform to a definition of JVs as at least two partners, each owning a minimum
equity stake of 20 per cent.19 Some 70 per cent of the JVs identified in this manner are
partnerships between host-country firms and foreign investors.
Figure IV.18 maps the group of domestic-foreign JVs according to the shareholding distribution.
By far the largest category of these JVs are 50-50 partnerships between foreign investors and
domestic firms. The 49-51 combinations are the next most relevant, likely driven by either
partner insisting on a controlling stake or by foreign equity limitations in investment policy rules.
Other combinations also occur frequently, especially at round numbers.
Figure IV.19 shows the countries with the highest shares of mixed domestic-foreign JVs in
the set of foreign affiliates, by economic grouping. The penetration of mixed JVs is highest in
transition economies, while it is relatively limited in developing economies. Among developing
economies, countries with a heavier presence of mixed JVs are concentrated in West Asia and
in South-East Asia, and are often characterized by a significant numbers of investment policy
restrictions and JV requirements.
Foreign share
Top 10 combinations
Domestic share Foreign share Share of mixed JVs
85
50 50 20%
75
20 80 4%
65
49 51 3%
55 51 49 3%
45 40 60 3%
75 25 3%
35
25 75 3%
25
30 70 3%
15
15 25 35 45 55 65 75 85 60 40 2%
Domestic share 80 20 2%
Figure IV.19. Countries with the highest share of mixed joint ventures
Top 10 countries by economic grouping, share of domestic-foreign JVs in total number of FAs (Per cent)
8% 4% Average 13%
Domestic direct owner Foreign direct owner and foreign Foreign direct owner and
and foreign ultimate owner ultimate owner (different nationalities) domestic ultimate owner
Domestic direct owner Foreign direct owner and foreign Foreign direct owner and
and foreign ultimate owner ultimate owner (different nationalities) domestic ultimate owner
Cases
In international investment policies, the challenges for IIA negotiators include these questions:
• How to effectively define treaty coverage, or how to avoid granting treaty benefits to investors
that were not intended to be covered by the treaty, including investors from the host State
(in round-tripping arrangements)?
• How to avoid investors using artificial entities (mailbox companies) that legally own an
investment to unduly gain access to treaty benefits?
• How to avoid MNEs, with their multitude of entities worldwide, restructuring ownership of
assets solely for the purpose of gaining access to treaty benefits?
This section first provides an overview of the role of ownership and control in national investment
policies and summarizes how policymakers across the world are dealing with the challenges
raised by ownership complexity. It then looks at challenges for IIA negotiators.
The impact of the growing complexity in MNE ownership structures on the effectiveness of rules
and regulations on foreign ownership at the national level and on the coverage of IIAs has wider,
systemic implications beyond the operational level. These are discussed in section E.
In the United States, an authorization from the Department of Transportation is needed to provide air transport services. The applicant must
establish that it is owned and controlled by United States citizens. Qualifying as United States citizens are corporations of which the president
and at least two thirds of the board of directors and other managing officers are citizens of the United States, which are under the actual
control of citizens of the United States and in which at least 75 per cent of the voting interest is owned and controlled by persons who are
citizens of the United States.
When filing for an authorization, applicants must list all persons who own or control at least 10 per cent of the company’s stock, indicating
for each the number of voting shares and the corresponding percentage of the total shares outstanding that are held, along with address,
citizenship, and principal business. If there are several layers of ownership (e.g. holding or parent companies), information must be provided
for each layer until the ultimate individual shareholders are reached. If the applicant’s stock is held for the benefit or account of a third party,
the name, address, and principal business of that person must be provided.
In evaluating the degree of foreign involvement, the Department of Transportation considers the total amount of voting stock and equity
interest in the air transport company. In some instances, up to 49 per cent of total foreign equity ownership has been approved, provided that,
by statute, foreigners cannot own, individually or in the aggregate, more than 25 per cent of the voting stock. The Department also examines
to what extent the foreign interests have power to veto or control the management structure, or if there is a United States citizen’s interest
that can vitiate the foreign control. The Department also considers whether the foreign investor has the right to name members of the board,
if there are provisions in the agreements that would permit the foreigner to cause a reorganization of the carrier, and if the agreements include
buy-out provisions of the United States investor and/or owner by either the carrier or the foreign investor. Finally, the Department may examine
whether there are any significant business relations between the foreign investor and the air carrier (e.g. whether the foreign investor has
loaned or guaranteed loans to the air carrier).
In the European Union (EU), regulation (EC) No. 1008/2008 governs the licensing of air carriers. In order to obtain an air transport license,
all undertakings established in the Community must satisfy certain operational, corporate and financial requirements. In particular, all
undertakings’ principal place of business (head office or registered office within which the principal functions and operational control are
exercised) must be located in the member State issuing the licence. In addition, member States and/or nationals of member States must
own more than 50 per cent of the undertaking and effectively control it, whether directly or indirectly through one or more intermediate
undertakings, except as provided for in an agreement with a third party to which the Community is a party. “Effective control” is defined as
the ability to exercise a decisive influence on an undertaking, in particular by (1) the right to use all or part of the assets of an undertaking, or
(2) rights or contracts which confer a decisive influence on the composition, voting or decisions of the bodies of an undertaking or otherwise
confer a decisive influence on the running of the business of the undertaking.
An air carrier licensing request must be submitted to the competent licensing authority of an individual member State. Investor information
disclosure requirements in front of the competent licensing authority include: shareholder details (including nationality and type of shares to
be held); articles of association; if the undertaking is part of a group, information on the relationship between the different entities; details
of existing and projected source of finance; and internal management accounts. In addition, the Community air carrier must notify the
competent licensing authority (1) in advance of any intended mergers and acquisitions; and (2) within 14 days of any change in the ownership
of any single shareholding which represents 10 per cent or more of the total shareholding value of the Community air carrier or of its parent
or ultimate holding company. The competent licensing authority is also authorized to suspend or revoke an operating license, if any of the
operational, corporate or financial requirements are not complied with.
Source: ©UNCTAD, based on information published by the United States Department of Transportation and Regulation EC No. 1008/2008.
The use of ownership-related policies varies significantly by sector and industry. Although the
services sector accounts for more than two thirds of global FDI, foreign ownership of companies
is more restricted in that sector than in the primary and manufacturing sectors. Worldwide,
restrictions on foreign ownership are most common and severe in the transportation, media,
electricity, and telecommunications industries (see figure IV.23).
UNCTAD’s monitoring of policy measures indicates that, over the 2010–2015 period, more than
half the newly introduced measures in transportation, mining and oil and gas, and agriculture
and forestry were in the direction of restriction. Other industries moved in the direction of
liberalization; in particular wholesale and retail trade and financial services (despite the recent
financial crisis) saw a significant amount of policy measures lifting or easing foreign ownership
restrictions.
Foreign investments in Algeria must be declared to the National Investment Development Agency. This agency is an autonomous government
body tasked with promoting foreign investment; it ensures that foreign investment is undertaken through a partnership with domestic
investors, who must always conserve a majority interest in the capital of the project (minimum of 51 per cent). The 51/49 rule applies
to all economic activities for the production of goods or services. It must also be observed by Algerian public companies that engage in
partnerships with foreign investors.
The declaration to the National Investment Development Commission includes a detailed description of the proposed investment project
together with information on shareholders (identity, nationality and address) and source of finance. Any subsequent change of information in
the original declaration, or any change in the commercial register, must be submitted to the Agency. Importantly, foreign investor companies
that hold shares in Algerian companies must communicate, every year, the list of their shareholders as identified in the foreign trade register.
In addition, when a foreign investor or a domestic partner wishes to sell its stake in the company to foreigners, its offer must first be presented
to the Government of Algeria, which has three months to exercise its pre-emption rights. Finally, the Government of Algeria must also be
consulted for the sale to foreigners of shares in Algerian companies that hold shares in domestic-foreign partnerships.
Source: Ordonnance n° 2001-03.
FDI is permitted in Indian companies, partnership firms, venture capital funds and limited liability partnerships. These entities may receive FDI
under the automatic route or the government route, depending on the economic activity/sector.
FDI in activities not covered under the automatic route requires prior Government approval. Investment proposals are considered by the
Foreign Investment Promotion Board (FIPB), a Government body that offers single-window clearance for foreign investments in the country
that are not allowed access through the automatic route.
Information disclosure requirements with the FIPB include the name and address of the Indian company, a description of the existing and
proposed activities of the company and a description of the capital structure of the company, as well as its proposed borrowings, export
commitments, employment opportunities, amount of foreign equity investment and foreign technology agreements. Additional documents
to be submitted to the FIPB include descriptions of Indian JV partners indicating their percentage share, group companies and affiliates;
information on the activities of the downstream companies; copies of the JV and/or shareholders agreement and technology transfer and/
or trademark agreements; pre- and post-investment shareholding structure of the investee and the investing companies; and, in cases of
indirect investment through Indian companies, details on the indirect investment and its shareholders.
The consolidated FDI Policy stipulates that in all sectors with sectoral caps, the balance equity, i.e. beyond the sectoral foreign investment
cap, has to be beneficially owned by resident Indian citizens and Indian companies owned or controlled by resident Indian citizens.
Source: “Consolidated FDI Policy 2015”, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.
Sector-specific licensing
Where countries impose sector-specific licensing requirements, the process of determining investor
origin is generally carried out by the sector regulator, which may require detailed information on
the full ownership structure up to the ultimate beneficial owners of the investing entity.
Most developed countries, and developing countries with relatively few foreign ownership
restrictions, may not have a dedicated FDI authorization procedure or an investment authority.
The establishment of companies with foreign investment tends to follow the normal business
registration and/or licensing process, and any subsequent modification of the value of FDI in
the company through the purchase or sale of shares is treated as an ordinary commercial
transaction.
The absence of a formal administrative procedure for the monitoring of FDI in such relatively
open countries means that foreign investor disclosure requirements are reduced in scope and
detail. Legislation tends to refer to the normal company registration process which does not
seek to determine ultimate investor identity, nor does it require detailed financial analysis of the
investment project. However, for sectors in which foreign ownership limitations do apply, the
procedures to determine nationality and ownership links of foreign investors, as implemented
by sectoral authorities, are often more demanding. In addition to basic information on the
identity and nationality of the direct and ultimate owner or investor (e.g. through the disclosure
of business relationships, the investing group’s structure, links with foreign governments),
countries seek further information, such as the origin of funds, members of the board of
directors, or agreements to act in concert.
AND
1 OR AND
Stipulate that
restrictions apply to
direct and indirectly In sector-specific Improve disclosure requirements as
1b
regulations
3 part of screening/approval processes
foreign owned
companies
Source: ©UNCTAD.
Mexico’s Foreign Investment Law subjects FDI to prior approval when the foreign investor (1) aims to own or acquire a stake higher than
49 per cent in an economic activity in selected industries, or (2) aims to own or acquire (directly or indirectly) a stake higher than 49 per cent
in a Mexican company in any sector when the value of the assets of that company, at the date of acquisition, exceeds a threshold set by the
National Foreign Investment Commission ($262 million in 2014).
The National Foreign Investment Commission, under the Secretariat of the Economy, is the government authority that determines whether an
investment in restricted sectors may move forward. It comprises various federal ministries and agencies, including the Secretariats of Internal
Affairs, Finance, Social Development, Environment and Natural Resources, Energy, and Communications and Transport. The Commission
has 45 business days to make a decision; otherwise the transaction is considered to be automatically approved. Information disclosure
requirements for foreign investors include their name, domicile and date of incorporation; the percentage of their proposed interest; the
amount of subscribed or payable capital stock; details of the investment project; and a detailed description of the existing or future corporate
structure, including ultimate ownership and all affiliates.
The Foreign investment Law imposes several supplementary sectoral foreign ownership limitations (e.g. 10 per cent in cooperative
companies, 25 per cent in domestic air transport, 49 per cent in arms manufacturing). These foreign investment participation limits cannot
be surpassed directly nor through trusts, contracts, partnerships or by-law agreements, or other mechanisms granting any control or a higher
participation than the one established. Nevertheless, the Ministry of Economy may authorize Mexican companies to issue “neutral investment
instruments”, which are not taken into account for the calculation of the percentage of foreign investment in the capital stock of Mexican
companies. Neutral investments solely grant pecuniary or corporate rights to their holders, without granting their holders voting rights in
regular shareholder meetings.
Source: Foreign Investment Law 1993, last amended in 2014.
Philippine law prohibits foreign control of public utilities, the exploitation of natural resources and the practice of a number of professions.
The Anti-Dummy Law (or Commonwealth Act No. 108, as amended) prohibits Philippine nationals from participating in evading national
ownership laws. It also prohibits foreigners from intervening in the management, operation, administration or control of any nationalized
activity.
Dummy status is indicated by the following criteria:
• Where the foreign investor provides practically all the funds for a joint investment undertaken with a Philippine national
• Where a foreign investor undertakes to provide practically all the technological support for the joint venture
• Where foreign investors, while minority stockholders, in practice manage the company
Source: “Understanding the Anti-Dummy Law”, http://news.abs-cbn.com/.
specific treatment to foreign investors, such as protection standards under an investment law,
or specific benefits reserved for foreign investors, such as fiscal incentives. In most cases,
these countries experience round-tripping investment by their own nationals at the level of
individuals or families, which set up entities offshore and channel investment back to their
home State. (Such ownership links were excluded from calculations in section C as part of the
methodological choice to focus on MNEs.)
In countries where round-tripping is a concern, the focus of countermeasures is generally on
tax policy measures (and revisions in tax treaties). Investment laws and regulations can contain
specific measures to prevent nationals from gaining unwarranted access to benefits reserved for
foreign investors. They can explicitly deny such benefits to nationals or to companies ultimately
owned by nationals, either in investment laws or in the qualifying criteria for incentives. They
may clarify that the exclusion specifically applies to ultimate beneficial owners (individuals
and families), and they can improve disclosure requirements on full corporate structures and
beneficial owners as part of investment or incentive application processes (figure IV.26).
Figure IV.26. Checking undue access to investor benefis by nationals: policy practices
AND
1 OR AND
Source: ©UNCTAD.
Cyprus
Luxembourg
4
Others 12
32% 29
≈1/3 United
12 Kingdom
Claimants
by country
18
25 Spain
Netherlands
100%
48%
No financial
68% Substantial or operating
operations information
20
20% Profile of
claimants
53
27
Principal Claimants Active Claimants that are Claimants
corporate without ownership claimants ultimate owners owned by parents
No substantial
claimants information and with ownership or based in the in third countries operations
inactive claimants information same country
Source: ©UNCTAD analysis based on UNCTAD’s ISDS Navigator and Orbis for ownership data.
Note: Based on 254 known treaty-based ISDS cases initiated during the 2010–2015 period. Corporate claimants only; individual claimants are excluded. In cases brought by more
than one claimant company, a principal claimant company was identified where possible. Non-substantial operations are defined as companies with fewer than 10 employees
or with zero assets where employee numbers are not available.
In about one third of the available decisions denying jurisdiction (rendered between 2000 and 2015), this
outcome was explicitly due to issues related to ownership and control and corporate structures (box figure IV.9.1.).
(Questions of ownership and control have also been addressed in a significant number of decisions in which the
tribunal decided to assume jurisdiction.) In their decisions, tribunals have arrived at settled approaches to some
of these questions; decisions on others remain inconsistent, creating legal uncertainty for host States and foreign
investors alike. In recent IIAs, there has been a growing tendency to clarify relevant clauses and concepts with a
view to circumscribing treaty coverage.
≈1/3
78 47
22
ISDS decisions Not publicly Not strictly related to Related to
declining jurisdiction available ownership/control ownership/control
Figure IV.28. SBA requirements: treaty practice over time (Per cent)
55%
30%
5%
16%
Source: ©UNCTAD analysis. Data derived from UNCTAD’s IIA Mapping Project.
Table IV.7. Complex ownership structures: IIA challenges and policy responses
Challenges Policy responses
Excluding treaty coverage/denying access to treaty benefits for…
Indirect ownership (e.g. round-tripping) Corporate entities effectively controlled by a host-State or third-country entity
Mailbox companies Corporate entities without SBA (“mailbox” companies)
Corporate entities with ownership links to the investment that have resulted from restructuring in anticipation
Time-sensitive restructuring
of potential disputes with the host States (“time-sensitive restructuring”)
Source: ©UNCTAD.
Tax policies are a major determinant of complexity in MNE ownership structures. As a result, recent efforts to improve international taxation
and tackle tax avoidance by international investors, in particular the OECD Base Erosion and Profit Shifting (BEPS) project (and the BEPS
Action Plan promoted by the G20) have grappled with many of the issues facing international investment policymakers today. Key elements
in the final BEPS recommendations published in 2015 that are relevant for IIAs in the context of complex ownership issues fall under two
actions:
• Action 3: CFC Rules. Controlled foreign company (CFC) rules apply to foreign companies that are controlled by shareholders in the parent
jurisdiction. The BEPS recommendations set out how to determine when shareholders have sufficient influence over a foreign company
for that company to be a CFC. Regarding the definition of control, the BEPS recommendations focus on two elements: (i) the type of control
that is required and (ii) the level of that control. They recommend a control test that includes at least legal and economic control, and note
that countries could supplement this with a de facto control test or a test based on consolidation for accounting purposes. Regarding level
of control, the BEPS project recommends treating a CFC as controlled when residents (including corporate entities, individuals or others)
hold more than 50 per cent of shares. The recommendations note, however, that countries may set their control threshold at a lower level.
The BEPS project recommends using one of three approaches to aggregate shareholders for purposes of the control test: an “acting-in-
concert” test, aggregation of related parties or a concentrated ownership test. The recommendations state that CFC rules should apply
when there is either direct or indirect control.
• Action 6: Preventing treaty abuse. To prevent the use of mailbox companies, the BEPS project recommends including in treaties (i) a
statement on the intention to avoid opportunities for non-taxation, (ii) limitations-on-benefits (LOB) rules limiting the availability of treaty
benefits to entities that meet certain criteria and (iii) a general anti-abuse rule based on the principal purpose test. Regarding LOB to
avoid treaty abuse, the BEPS project proposes a series of tests to determine whether an entity is eligible for treaty benefits. The tests are
based on characteristics such as legal structure, ownership or activities, ensuring a link between the entity and the residence state. The
LOB rules are to be included in the OECD model tax treaty. A simplified version of the LOB rule is also proposed, combined with a general
“principal purpose test” to capture cases not caught by the simplified rule. The latter test states that treaty benefits can be denied when
it is reasonable to conclude that obtaining treaty benefits was one of the principal purposes of any arrangement that resulted directly or
indirectly in that benefit (e.g. when the principal purpose of an intermediate entity is to obtain coverage under a treaty).
Importantly, the LOB rule contains provisions dealing specifically with indirect ownership; the indirect ownership rule would require that each
intermediate owner of the entity being tested be a resident of either contracting State (i.e. all intermediate entities in an ownership chain
would need to be eligible for treaty benefits). The indirect ownership rules are bracketed: countries may consider this indirect ownership
requirement to be unduly restrictive and prefer to omit such a rule in the treaties or treaty models.
Source: OECD (2015b and 2015c).
AND
1 OR AND
Policymakers seeking to clarify the meaning of “effective control” can find guidance in certain IIAs and decisions by arbitral tribunals. They
may also be inspired by the controlled foreign companies (CFCs) rules proposed in Action 3 of the BEPS recommendations.
Some IIAs have clarified what is meant by effective control by providing a non-exhaustive list of factors to be considered by tribunals. They
include factors such as owning more than 50 per cent of the entity’s capital or equity participation, voting rights that allow for a decisive
position in the entity’s managing bodies and the right to select or exercise substantial influence over the selection of the entity’s managing
bodies. In the context of the definition of effective control, legal factors (voting rights, right to select members of the entity’s managing bodies)
are relevant, but not necessarily sufficient for the tribunal to find the existence of control (which will depend on the circumstances of the case).
Arbitral interpretations also provide guidance on the meaning of effective control. Tribunals have considered that majority shareholdings
would normally imply the existence of control (see e.g. Aucoven v. Venezuela (2001)).a Tribunals have also inquired into effective control in
cases where ownership did not lead to a straightforward answer (in Pac Rim v. El Salvador (2012)).
When deciding on the existence of effective control, tribunals have considered a variety of factors, including:
• The ability to effectively decide and implement the key decisions of the business activity of an enterprise (e.g. initiate the investment
operation, authorize expenditures, approve budget and dividend payment, decide on branding and marketing strategy, receive reports on
the controlled entity’s activities)
• Participation in the day-to-day management of the entity (e.g. conduct of meetings on behalf of the company; being the effective
addressee of relevant correspondence – such as legal advice – regarding the company’s operations); appearance of being the effective
decision maker in minutes from management body meetings
• Access to know-how (e.g. access to technology, supplies and machines, selection of the suppliers, expertise regarding the expected
return on the investment); access to capital (such as initial expenditures)
• Authoritative reputation
(See e.g. Philip Morris v. Australia (2015), Vacuum Salt v. Ghana (1994) (contract-based case, but relevant for the definition of foreign control
under Art 25(2)(b) ICSID Convention), Thunderbird v. Mexico (2006), Caratube v. Kazakhstan (I) (2012), CECFT v. Gabon (2005) (contract-
based case).
On occasion, tribunals have also pierced through corporate layers to ascertain the ultimate corporation or national entity controlling the
relevant investor or investment (e.g. TSA Spectrum v. Argentina (2008), National Gas v. Egypt (2014)).
Source: ©UNCTAD.
a
However, this presumption can be rebutted (as in Caratube v. Kazakhstan (I) (2012)).
AND/OR
1 OR AND
Limit IIA protection to investors having
3 their seat in the contracting party
Require SBA in the clarify that seat means principal place
country whose of business (optional)
nationality the investor by giving indicators (optional)
claims as a condition AND
for treaty coverage
1b As a ground for invoking the DoB clause
specify conditions for invoking DoB Render the policy options effective
clause (IPFSD option 2.2.2) 4
by putting the burden of proof on the investor
Another set of options builds on the fact that such mailbox companies typically would not qualify
as the seat of corporate structures (a company’s seat implies the location of real operations,
e.g. of administrative or managerial nature). In the absence of other options, taking the “seat
approach” – i.e. conditioning IIA coverage on an investor having its seat in a contracting
party (as in the Afghanistan–Germany BIT (2005) and the Albania–France BIT (1995)) can
help preclude coverage of mailbox companies. Defining the seat as or referring directly to the
“place of management”, as done in the BLEU–United Arab Emirates BIT (2004) or the ASEAN
Agreement for the Promotion and Protection of Investments (1987), can help make this option
effective.
Finally, policymakers may decide to render both of the above options more effective by allocating
the burden of proof to the investor (i.e. in case of doubt, the investor is required to prove that it
has SBA or an effective seat).
Policymakers seeking to clarify the meaning of SBA can find guidance in existing IIAs, model treaties and decisions by arbitral tribunals. They
may also be inspired by initiatives in other policy areas grappling with similar concerns stemming from complex ownership structures, notably
the OECD’s BEPS plan, which in Action 6 of its recommendations suggests options for limitations on benefits.
Thus far, only a few IIAs clarify the meaning of SBA. These IIAs are typically negotiated in a specific context (e.g. the China–Hong Kong, SAR
CEPA (2003), the China–Macao, SAR CEPA (2004)) and include clarifying indicators in the “rules of origin” for trade in services (covering such
trade through commercial presence (Fink and Nikomborirak, 2007)). General indicators include factors related to:
• The entity’s business itself (the nature and scope of business, number and type of clients and contracts, amount of sales, turnover from
tax returns, payment of profit tax under local law, years of establishment or the requirement to exercise a similar activity in the home as
in the host country)
• The entity’s employees (the number of employees, share of employees having permanent residence in or nationality of the home country)
• The physical presence of the entity (ownership or rental of premises, costs for maintenance of physical location, phone and fax numbers
offered to clients and other third parties for contact with the company)
These IIAs also include sector-specific criteria (e.g. for legal, construction, banking, insurance and other financial services: three or five years
of operations; for transportation services: share of ships, calculated in tonnage, registered in the home country). A memorandum from the
German Federal Ministry for Economic Affairs and Energy on a model BIT for developed countries with a functioning legal system (BMWi,
2015) provides an indicative list of factors for ascertaining the existence of SBA. They include (i) a recognizable physical presence, (ii) actual
economic activities and (iii) a considerable number of employees. This model, as well as the Indian draft model BIT (July 2015 version), also
expressly exclude certain activities, such as the passive holding of stock, from the definition of SBA.
Arbitral tribunals have used indicators for ascertaining the existence of SBA. In the absence of specific treaty language, tribunals have
considered:
• The place where the board of directors meets and whether the board’s minutes were available (in Pac Rim v. El Salvador (2012))
• The existence of a continuous physical presence (in Amto v. Ukraine (2008) and Pac Rim v. El Salvador)
• The existence of permanent staff (in Amto v. Ukraine)
• The active holding of shares in the entity’s subsidiaries (in Pac Rim v. El Salvador)
Source: ©UNCTAD.
1a As a specific provision
Fit-for-purpose test
For assessing the viability of alternative policy solutions, policymakers should conduct a
“fit-for-purpose test” on ownership-based national investment policy measures, asking two sets
of questions:
56% 2%
Direct owner outside, but
ultimate owner inside the region
(typically covered by IIAs)
71% 38%
3% Direct and ultimate owner within
the region: fully intraregional
25% (typically covered by IIAs)
When negotiating new treaties, negotiators generally do not evaluate the ownership patterns
of MNEs in the territories of the contracting partners. They also tend not to take explicitly into
consideration the ease with which companies can be incorporated in treaty-partner jurisdictions.
As a result, protection may be offered to a much larger pool of companies than anticipated.
This issue becomes even more important when negotiating treaties with pre-establishment
provisions.
In conclusion, the overarching objective of investment policy is to make investment work for
sustainable development, maximizing its benefits and minimizing its negative effects. Complex
ownership structures call into question the effectiveness of ownership-based policy tools widely
used for this purpose, both nationally and internationally. This requires a re-evaluation of these
tools for the pursuit of the common goal.
One approach is to improve the application of ownership-based regulations by enhancing
disclosure requirements and procedures to identify the ultimate owner of an investment.
Another approach is to replace, where feasible and appropriate, ownership-based regulations
with other policies such as competition, taxation, industrial development, public services or
cultural policies. It is important to find the right policy mix, effective and proportionate. Whichever
approach is chosen, a balance between liberalization and regulation must be found in pursuing
the ultimate objective of promoting investment for sustainable development.
To help policymakers chart a way forward, WIR16 provides insights on the global map of
ownership links in MNEs, and on how national and international policymakers around the world
can respond to the challenges posed by complex ownership structures. The new data, empirical
analysis, and policy responses presented here can inspire further research to support better
informed policy decisions. They also make a strong case for targeted technical assistance
and capacity building, and for more international consensus-building. UNCTAD will continue to
support these efforts.
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ANNEX
TABLES
Worlda 1 388 821 1 566 839 1 510 918 1 427 181 1 276 999 1 762 155 1 391 918 1 557 640 1 308 820 1 310 618 1 318 470 1 474 242
Developed economies 699 889 817 415 787 359 680 275 522 043 962 496 983 405 1 128 047 917 783 825 948 800 727 1 065 192
Europe 431 688 478 063 483 195 323 366 305 988 503 569 585 478 558 656 411 395 319 734 311 033 576 254
European Union 384 945 425 843 446 454 319 457 292 025 439 458 478 906 491 730 351 719 272 925 296 362 487 150
Austria 2 575 10 616 3 989 5 720 9 324 3 837 9 585 21 913 13 109 15 568 5 065 12 399
Belgium 43 231 78 258 6 516 13 682 -8 703 31 029 -8 312 46 371 33 821 18 161 5 010 38 547
Bulgaria 1 549 2 945 1 697 1 837 1 777 1 774 313 316 325 187 613 86
Croatia 1 153 1 692 1 493 922 3 678 174 68 146 -56 -169 1 935 13
Cyprus 39 604 -21 419 7 341 -12 574 308 4 534 38 203 -17 096 10 869 -10 971 1 265 9 718
Czech Republic 6 141 2 318 7 984 3 639 5 492 1 223 1 167 -327 1 790 4 019 1 620 2 305
Denmark -9 157 11 437 414 1 051 3 474 3 642 1 381 11 254 7 355 7 176 8 410 13 214
Estonia 1 509 1 005 1 565 546 507 208 167 -1 454 1 054 431 -230 306
Finland 7 359 2 550 4 154 -169 17 302 8 290b 10 167 5 011 7 543 -2 402 -563 -10 538b
France 13 890 31 642 16 979 42 892 15 191 42 883 48 155 51 415 31 639 24 997 42 869 35 069
Germany 65 642 67 514 28 181 11 671 880 31 719c 125 451 77 930 62 164 40 362 106 246 94 313c
Greece 330 1 144 1 740 2 817 1 670 -289 1 557 1 772 677 -785 905 379
Hungary 2 193 6 300 14 409 3 404 7 490 1 270 1 172 4 702 11 703 1 869 3 521 1 533
Ireland 42 804 23 545 45 259 44 899 31 134 100 542 22 348 -1 165 22 565 29 026 43 133 101 616
Italy 9 178 34 324 93 24 273 23 223 20 279 32 685 53 667 8 007 25 134 26 539 27 607
Latvia 379 1 453 1 109 903 595 643 19 61 192 411 286 16
Lithuania 800 1 446 700 469 -157 863 -6 55 392 192 59 -10
Luxembourg 39 129 8 843 143 003 15 371 12 073 24 596 23 253 10 716 89 806 25 283 23 437 39 371
Malta 5 471 22 064 14 424 12 201 11 580 9 532b -410 9 700 2 592 2 651 2 366 -215b
Netherlands -7 184 24 368 20 114 51 375 52 198 72 649 68 358 34 789 6 169 69 974 55 966 113 429
Poland 12 796 15 925 12 424 3 625 12 531 7 489 6 147 1 026 2 901 -451 1 974 2 901
Portugal 2 424 7 428 8 869 2 672 7 614 6 031 -9 782 13 435 -8 206 -2 043 4 108 8 167
Romania 3 041 2 363 3 199 3 601 3 211 3 389 6 -28 -114 -281 -373 310
Slovakia 1 770 3 491 2 982 -604 -331 803 946 713 8 -313 -123 -183
Slovenia 105 1 087 339 -151 1 061 993 -18 198 -259 -214 264 -65
Spain 39 873 28 379 25 696 32 935 22 891 9 243 37 844 41 164 -3 982 13 814 35 304 34 586
Sweden 140 12 923 16 334 4 858 3 561 12 579 20 349 29 861 28 952 30 071 8 564 23 717
United Kingdom 58 200 42 200 55 446 47 592 52 449 39 533 48 092 95 586 20 701 -18 771 -81 809 -61 441
Other developed Europe 46 744 52 220 36 741 3 910 13 963 64 111 106 572 66 926 59 676 46 809 14 670 89 104
Gibraltar 710b 7 554b 952b -1 082b -1 106b -412b - - - - - -
Iceland 245 1 107 1 025 397 447 -76 -2 368 18 -3 206 460 -257 -599
Norway 17 044 15 250 18 774 3 949 7 987 -4 239 23 239 18 763 19 561 7 792 18 254 19 426
Switzerland 28 744 28 309 15 989 646 6 635 68 838 85 701 48 145 43 321 38 557 -3 327 70 277
North America 226 449 269 531 231 538 283 254 165 120 428 537 312 502 448 717 374 061 362 806 372 237 367 151
Canada 28 400 39 669 43 111 71 753 58 506 48 643 34 723 52 148 55 864 54 879 55 688 67 182
United States 198 049 229 862 188 427 211 501 106 614 379 894 277 779 396 569 318 197 307 927 316 549 299 969
Other developed economies 41 751 69 820 72 626 73 655 50 935 30 391 85 426 120 674 132 326 143 408 117 457 121 788
Australia 36 443 58 908 58 981 56 977 39 615 22 264 19 804 1 716 6 737 1 581 3 -16 739
Bermuda 287d -287d 48d 93d -3d -204d -14d -337d 240d 51d 120d -84d
Israel 6 335 8 728 8 468 12 449 6 739 11 566 8 657 9 166 3 256 5 502 3 667 9 743
Japan -1 252 -1 758 1 732 2 304 2 090 -2 250 56 263 107 599 122 549 135 749 113 595 128 654
New Zealand -62 4 229 3 397 1 832 2 495 -986 716 2 530 -456 525 73 214
Developing economiesa 625 330 670 149 658 774 662 406 698 494 764 670 358 029 373 931 357 844 408 886 445 579 377 938
Africa 43 571 47 786 55 156 52 154 58 300 54 079 8 670 6 122 12 386 15 543 15 163 11 325
North Africa 15 746 7 548 15 759 11 961 11 625 12 647 4 781 1 490 3 098 392 770 1 831
Algeria 2 301 2 580 1 499 1 693 1 507 -587 220 534 -41 -268 -18 103
Egypt 6 386 -483 6 031 4 256 4 612 6 885 1 176 626 211 301 253 182
Libya 1 909 - 1 425 702 50b 726b 2 722 131 2 509 6 78b 864b
Morocco 1 574d 2 568d 2 728d 3 298d 3 561d 3 162d 589d 179d 406d 332d 436d 649d
South Sudan - - 161b -793b -419b -277b - - - - - -
Sudan 2 064 1 734 2 311 1 688 1 251 1 737 - - - - - -
Tunisia 1 513 1 148 1 603 1 117 1 063 1 002 74 21 13 22 22 33
Other Africa 27 826 40 238 39 397 40 193 46 675 41 432 3 889 4 631 9 287 15 151 14 392 9 493
West Africa 12 008 18 956 16 873 14 493 12 115 9 894 1 305 2 582 3 504 2 218 2 246 2 030
Benin 177 161 230 360 405 229 -18 60 19 59 17 26
Burkina Faso 35 144 329 490 357 167 -4 102 73 58 69 28
Cabo Verde 159 155 126 70 135 95 - 1 -8 -14 -9 -3
Côte d'Ivoire 339 302 330 407 439 430 25 15 14 -6 16 8
Gambia 20 66 93 38 28 11 - 58 10 48 17 19
Ghana 2 527 3 237 3 293 3 226 3 357 3 192 - 25 1 9 12 221
/...
Singapore 55 076d 48 329d 57 150d 66 067d 68 496d 65 262d 35 407d 31 459d 18 341d 39 592d 39 131d 35 485d
Thailand 14 568 3 271 16 517 16 652 3 537 10 845 8 162 6 258 10 597 11 934 4 409 7 776
Timor-Leste 29 47 39 50 49 43 26 -33 13 13 13 13
Viet Nam 8 000 7 519 8 368 8 900 9 200 11 800 900 950 1 200 1 956 1 150 1 100
South Asia 35 069 44 352 32 413 35 629 41 446 50 485 16 294 12 861 8 901 2 156 12 105 7 762
Afghanistan 211 83 94 69 54b 58b 72 70 65 - - -
Bangladesh 913 1 136 1 293 1 599 1 551 2 235 15 13 43 34 44 46
Bhutan 76 29 49 14 32 12 - - - - - -
India 27 417 36 190 24 196 28 199 34 582 44 208 15 947 12 456 8 486 1 679 11 783 7 501
Iran, Islamic Republic of 3 649 4 277 4 662 3 050 2 105 2 050b 170b 226b 161b 166b 89b 139b
Maldives 216 424 228 361 333 324 - - - - - -
Nepal 87 95 92 71 30 51 - - - - - -
Pakistan 2 022 1 162 859 1 333 1 865 865 47 35 82 212 121 23
Sri Lanka 478 956 941 933 894 681 43 60 64 65 67 53
West Asia 63 186 52 832 47 558 45 517 43 290 42 362 17 772 30 406 22 569 44 675 20 366 31 311
Bahrain 156 98 1 545 3 729 1 519 -1 463 334 -920 516 532 -394 497
Iraq 1 396 1 882 3 400 5 131 4 782 3 469 125 366 490 227 242 153
Jordan 1 689 1 486 1 513 1 805 2 009 1 275 28 31 5 16 83 1
Kuwait 1 305 3 259 2 873 1 434 953 293 5 890 10 773 6 741 16 648 -10 468 5 407
Lebanon 3 748 3 177 3 159 2 701 2 906 2 341 487 958 1 012 1 965 1 213 619
Oman 1 243d 1 753d 850d 876d 739d 822b 1 498d 1 222d 884d 10d 1 670d 855b
Qatar 4 670 939 396 -840 1 040 1 071 1 863 10 109 1 840 8 021 6 748 4 023
Saudi Arabia 29 233 16 308 12 182 8 865 8 012 8 141 3 907 3 430 4 402 4 943 5 396 5 520
State of Palestine 206 349 58 176 160 120 84 -128 29 -48 188 185
Syrian Arab Republic 1 469 804 - - - - - - - - - -
Turkey 9 086 16 142 13 284 12 284 12 134 16 508 1 469 2 330 4 105 3 527 6 658 4 778
United Arab Emirates 8 797 7 152 8 828 9 491 10 823 10 976 2 015 2 178 2 536 8 828 9 019 9 264
Yemen 189 -518 -531 -134 -1 787b -1 191b 71b 58b 8b 5b 12b 8b
Latin America and the
167 118 193 315 190 509 176 002 170 285 167 582 57 251 48 264 41 501 32 293 31 435 32 992
Caribbeana
South America 131 387 156 599 154 697 114 928 128 284 120 930 41 970 34 310 16 604 16 709 21 057 23 035
Argentina 11 333 10 840 15 324 9 822 5 065 11 655 965 1 488 1 055 890 1 921 1 139
Bolivia, Plurinational
643 859 1 060 1 750 648 503 -29 - - - - -
State of
Brazil 83 749 96 152 76 098 53 060 73 086 64 648 22 060 11 062 -5 301 -1 180 2 230 3 072
Chile 16 583 16 674 24 977 17 878 21 231 20 176 10 534 13 617 17 040 8 388 11 803 15 513
Colombia 6 430 14 648 15 039 16 209 16 325 12 108 5 483 8 420 -606 7 652 3 899 4 218
Ecuador 165 644 567 727 773 1 060 131b 59b 41b 63b 77b 60b
Guyana 198 247 294 214 255 122 - - - - - -
Paraguay 216 557 738 72 346 283 128d -109d 8d 2d -32d -7b
Peru 8 455 7 665 11 918 9 298 7 885 6 861 266 147 78 137 96 127
Suriname -248 70 174 188 163 276 - 3 -1 - - -
Uruguay 2 289 2 504 2 536 3 032 2 188 1 647 -60 -7 -3 5 39 33
Venezuela, Bolivarian
1 574 5 740 5 973 2 680 320 1 591 2 492 -370 4 294 752 1 024 -1 119
Republic of
Central America 32 752 32 271 29 647 56 334 36 614 41 913 15 426 12 897 22 962 13 999 8 929 8 976
Belize 97d 95d 189d 95d 153d 65d 1d 1d 1d 1d 2d -
Costa Rica 1 466 2 178 2 258 3 091 2 748 2 850 25 58 455 308 83 141
El Salvador -230 219 482 179 311 429 -5 - -2 3 - -
Guatemala 806 1 026 1 245 1 296 1 389 1 208 24 17 39 34 106 93
Honduras 969 1 014 1 059 1 060 1 144 1 204 -1 2 208 68 24 91
Mexico 26 431 23 649 20 437 45 855 25 675 30 285 15 050 12 636 22 470 13 138 8 304 8 072
Nicaragua 490 936 768 816 884 835 16 8 65 116 80 51
Panama 2 723 3 153 3 211 3 943 4 309 5 039 317 176 -274 331 329 528
Caribbeana 2 979 4 445 6 164 4 740 5 388 4 739 -145 1 056 1 936 1 585 1 449 981
Anguilla 11 39 44 42 79 85 - - - - - -
Antigua and Barbuda 101 68 138 101 155 154 5 3 4 6 6 6
Aruba 237 489 -316 226 247 -23 6 3 3 4 9 10
Bahamas 1 148 1 533 1 073 1 111 1 596 385 150 524 132 277 397 158
Barbados 446 362 313 -35 486 254 343 389 -129 108 -22 86
British Virgin Islands 51 226b 57 576b 74 502b 112 128b 49 986b 51 606b 53 356b 59 934b 54 110b 103 290b 81 192b 76 169b
Cayman Islands 11 948b 19 026b 8 104b 18 176b 23 731b 18 987b 9 400b 6 971b 3 222b 11 029b 8 738b 8 273b
Curaçao 89 69 57 18 69 175b 15 -30 12 -16 44 35b
Dominica 43 35 59 25 35 36 1 - - 2 2 2
Dominican Republic 2 024 2 277 3 142 1 991 2 208 2 222 -204 -79 274 -391 177 22
/...
Grenada 64 45 34 114 38 61 3 3 3 1 1 1
Haiti 178 119 156 160 99 104 - - - - - -
Jamaica 228d 218d 413d 595d 591d 794d 58d 75d -18d -86d -2d 4d
Montserrat 4 2 3 4 6 4 - - - - - -
Saint Kitts and Nevis 119 112 110 139 120 78 3 2 2 2 2 2
Saint Lucia 127 100 78 95 93 95 5 4 4 3 3 3
Saint Vincent and the
97 86 115 160 110 121 - - - - - -
Grenadines
Sint Maarten 33 -48 14 34 47 11b 3 1 -4 4 -1 -1b
Trinidad and Tobago 549 1 831 2 453 1 994 2 489 1 619b - 1 060 1 681 2 061 1 275 955b
Oceania 2 235 2 346 3 556 2 837 1 974 2 287 621 932 1 603 2 188 1 413 1 796
Cook Islands - - 1b 3b - 1b 540b 814b 1 307b 2 033b 1 304b 1 548b
Fiji 350 402 376 264 343 332b 6 1 2 4 38 -44b
French Polynesia 64 131 155 99 45 83b 38 27 43 65 30 39b
Kiribati -7 d
1 d
-3d
1d
8d
2b
- 1d
-
d
-d
8 d
2b
Marshall Islands 89b 150b -18b 156b -299b -54b -46b 29b 31b 13b -46b -1b
Micronesia, Federated
1b 1b 1b 1b 1b 1b - - - - - -
States of
New Caledonia 1 439 1 715 2 831 2 171 1 782 1 879b 76 40 109 61 62 64b
Palau 3 8 22 18 40 -9b - - - - - -
Papua New Guinea 29 -310 25 18 -30 -28 - 1 89 - - 174
Samoa - 15 26 14 23 16 - 1 11 - 4 2
Solomon Islands 166 120 24 53 21 21 2 4 3 3 1 5
Tonga 25b 44b 31b 51b 56b 13b 3b 16b 7b 7b 11b 5b
Tuvalu 1b - 2b 1b 1b 1b - - - - - -
Vanuatu 60d 70d 78d -19d -18d 29d 1d 1d 1d -d 1d 2d
Transition economies 63 601 79 275 64 786 84 500 56 463 34 988 50 484 55 662 33 193 75 784 72 164 31 112
South-East Europe 4 600 7 890 3 606 4 758 4 576 4 832 317 403 438 482 477 443
Albania 1 051 876 855 1 266 1 110 1 003 6 30 23 40 33 38
Bosnia and Herzegovina 406 496 395 302 502 249 46 18 62 42 15 21
Serbia 1 686 4 932 1 299 2 053 1 996 2 347 185 318 331 329 356 346
Montenegro 760 558 620 447 497 699 29 17 27 17 27 12
The former Yugoslav
213 479 143 335 272 174 5 - -26 30 10 -15
Republic of Macedonia
CIS 58 187 70 336 60 269 78 793 50 137 28 806 50 032 55 112 32 458 75 183 71 280 30 528
Armenia 529 653 497 380 404 181 8 216 16 27 16 11
Azerbaijan 563 1 465 2 005 2 632 4 430 4 048 232 533 1 192 1 490 3 230 3 260
Belarus 1 393 4 002 1 429 2 230 1 828 1 584 51 126 121 246 39 118
Kazakhstan 11 551 13 973 13 337 10 321 8 406 4 021 7 885 5 390 1 481 2 287 3 639 616
Kyrgyzstan 438 694 293 626 248 404 - - - - - -
Moldova, Republic of 208 288 195 243 201 229 4 21 20 29 42 17
Russian Federation 31 668 36 868 30 188 53 397 29 152 9 825 41 116 48 635 28 423 70 685 64 203 26 558
Tajikistan 74 160 232 105 263 227b - - - - - -
Turkmenistan 3 632b 3 391b 3 130b 3 732b 4 170b 4 259b - - - - - -
Ukraine 6 495 7 207 8 401 4 499 410 2 961 736 192 1 206 420 111 -51
Uzbekistan 1 636b 1 635b 563b 629b 626b 1 068b - - - - - -
Georgia 814 1 048 911 949 1 750 1 350 135 147 297 120 407 141
Memorandum
Least developed countries
23 763 21 917 23 408 21 366 26 311 35 107 3 090 4 081 4 683 7 527 5 199 2 599
(LDCs)e
Landlocked developing countries
26 187 36 343 34 968 30 313 29 674 24 466 9 529 6 411 2 320 3 998 6 895 3 613
(LLDCs)f
Small island developing states
4 742 6 213 6 625 5 810 7 056 4 819 695 2 247 2 023 2 587 1 793 1 436
(SIDS)g
Worlda 7 488 449 20 189 655 24 983 214 7 436 836 20 803 737 25 044 916
Developed economies 5 791 254 13 443 850 16 007 398 6 682 413 17 424 490 19 440 805
Europe 2 466 199 8 171 968 8 782 483 3 157 136 10 249 006 10 649 249
European Union 2 345 798 7 357 768 7 772 956 2 890 286 9 007 230 9 341 790
Austria 31 165 160 615 164 784 24 821 181 639 208 263
Belgium .. 873 315 468 710 .. 950 885 458 794
Belgium and Luxembourg 195 219 - - 179 773 - -
Bulgaria 2 704 47 231 42 106 67 2 583 3 083
Croatia 2 664 31 510 26 375 760 4 472 5 448
Cyprus 2 846 212 576 138 263 557 197 433 133 134
Czech Republic 21 644 128 504 113 057 738 14 923 18 481
Denmark 73 574 96 984 100 858b 73 100 165 375 190 608b
Estonia 2 645 15 551 18 914 259 5 545 6 063
Finland 24 273 86 698 92 340b 52 109 137 663 94 852b
France 184 215 630 710 772 030b 365 871 1 172 994 1 314 158b
Germany 470 938 955 881 1 121 288b 483 946 1 364 565 1 812 469b
Greece 14 113 35 026 17 688 6 094 42 623 26 487
Hungary 22 870 90 845 92 132 1 280 22 314 38 503
Ireland 127 089 285 575 435 490 27 925 340 114 793 418
Italy 122 533 328 058 335 335 169 957 491 208 466 594
Latvia 1 691 10 935 14 549 19 895 1 230
Lithuania 2 334 13 271 14 440 29 2 086 2 235
Luxembourg .. 172 257 205 029b .. 187 027 169 570b
Malta 2 263 129 770 163 522b 193 60 596 67 930b
Netherlands 243 733 588 078 707 043 305 461 968 142 1 074 289
Poland 33 477 187 602 213 071b 268 16 407 27 838b
Portugal 34 224 114 994 114 220 19 417 62 286 63 565
Romania 6 953 68 093 69 112 136 1 511 589
Slovakia 6 970 50 328 48 163 555 3 457 2 562
Slovenia 2 389 10 667 11 847 772 8 147 5 473
Spain 156 348 628 341 533 306 129 194 653 236 472 116
Sweden 93 791 347 163 281 876 123 618 374 399 345 907
United Kingdom 463 134 1 057 188 1 457 408 923 367 1 574 707 1 538 133
Other developed Europe 120 400 814 200 1 009 528 266 850 1 241 775 1 307 458
Gibraltar 2 834b 14 247b 20 153b - - -
Iceland 497 11 784 7 273 663 11 466 7 153
Norway 30 265 177 318 149 150 34 026 188 996 162 124
Switzerland 86 804 610 851 832 952b 232 161 1 041 313 1 138 182b
North America 3 108 255 4 406 182 6 344 007 3 136 637 5 808 053 7 061 120
Canada 325 020 983 889 756 038 442 623 998 466 1 078 333
United States 2 783 235 3 422 293 5 587 969 2 694 014 4 809 587 5 982 787
Other developed economies 216 800 865 699 880 907 388 640 1 367 431 1 730 437
Australia 121 686 527 064 537 351 92 508 449 740 396 431
Bermuda 265b 2 837c 2 432c 108b 925c 843c
Israel 20 426 61 180 104 370 9 091 68 972 89 347
Japan 50 322 214 880 170 698 278 442 831 076 1 226 554
New Zealand 24 101 59 738 66 056 8 491 16 717 17 262
Developing economiesa 1 644 215 6 042 538 8 374 428 734 811 3 008 790 5 296 346
Africa 153 484 594 608 740 436 38 885 133 030 249 376
North Africa 45 328 201 104 244 279 3 199 25 777 34 608
Algeria 3 379b 19 540b 26 232 205b 1 513b 1 822
Egypt 19 955 73 095 94 266 655 5 448 7 731
Libya 471b 16 334b 17 762b 1 903b 16 615b 20 203b
Morocco 8 842b 45 082c 48 696c 402b 1 914c 4 555c
Sudan 1 136 15 690 24 412 - - -
Tunisia 11 545 31 364 32 911 33 287 297
Other Africa 108 156 393 504 496 157 35 687 107 253 214 768
West Africa 33 010 94 756 158 545 6 381 10 550 19 501
Benin 213 604 1 666 11 21 168
Burkina Faso 28 354 1 682 - 8 283
Cabo Verde 192b 1 252 1 486 - 1 ..d
Côte d'Ivoire 2 483 6 978 7 318 9 94 116
Gambia 216 323 350b - - -
/...
Singapore 110 570c 632 760c 978 411c 56 755c 466 129c 625 259c
Thailand 30 944 139 286 175 442 3 232 21 369 68 058
Timor-Leste - 155 332 - 94 86
Viet Nam 14 730b 57 004b 102 791b - 2 234b 8 590b
South Asia 30 743 269 422 387 182 2 764 100 385 143 990
Afghanistan 17b 1 392b 1 750b - - -
Bangladesh 2 162 6 072 12 912 68 98 188
Bhutan 4 52 215 - - -
India 16 339 205 580 282 273 1 733 96 901 138 967
Iran, Islamic Republic of 2 597 28 953 45 097b 414b 1 673b 2 455b
Maldives 128b 1 114b 2 784b - - -
Nepal 72b 239b 579b - - -
Pakistan 6 919 19 829 31 600b 489 1 362 1 719b
Sri Lanka 2 505 6 190 9 972 60 351 660
West Asia 69 286 591 146 705 240 14 553 164 707 308 497
Bahrain 5 906 15 154 27 660 1 752 7 883 14 625
Iraq ..d 7 965 26 630b - 632 2 109b
Jordan 3 135 21 899 29 958 44 473 609
Kuwait 608 11 884 14 604 1 428 28 189 31 577
Lebanon 14 233 44 324 58 608 352 6 831 12 599
Oman 2 577b 14 987b 20 027b - 2 796b 7 438b
Qatar 1 912b 30 564b 33 169b 74b 12 545b 43 287b
Saudi Arabia 17 577 176 378 224 050 5 285b 26 528 63 251
State of Palestine 1 418b 2 175b 2 486 - 242 352
Syrian Arab Republic 1 244 9 939b 10 743b - 5 5
Turkey 18 812 187 151 145 471 3 668 22 509 44 656
United Arab Emirates 1 069b 63 869 111 139 1 938b 55 560 87 386b
Yemen 843 4 858b 697b 12b 513b 605b
Latin America and the Caribbeana 460 983 1 554 060 1 718 595 105 541 407 476 554 502
South America 308 949 1 080 750 1 111 254 95 870 278 193 383 616
Argentina 67 601 87 552 93 871b 21 141 30 328 37 289b
Bolivia, Plurinational State of 5 188 6 890 11 710 29 8 52
Brazil 122 250 640 334 485 998 51 946 149 337 181 447
Chile 45 753 154 624 207 827 11 154 51 161 87 415
Colombia 11 157 82 977 149 692 2 989 23 717 47 300
Ecuador 6 337 11 857 15 627 252b 561b 861b
Falkland Islands (Malvinas) 58b 75b 75b - - -
Guyana 756 1 784 2 915 1 2 2
Paraguay 1 219 3 096 5 774 38b 244b 106b
Peru 11 062 42 976 86 114 505 3 319 2 815
Suriname - - 1 676 - - -
Uruguay 2 088 12 479 21 604 138 345 106
Venezuela, Bolivarian Republic of 35 480 36 107 28 370 7 676 19 171 26 223
Central America 139 668 425 493 533 182 8 598 126 242 160 664
Belize 294c 1 461c 2 055c 42c 49c 67c
Costa Rica 2 709 14 066 27 172b 86 650 2 094b
El Salvador 1 973 7 284 9 158 104 1 2
Guatemala 3 420 6 518 13 176 93 382 671
Honduras 1 392 6 951 12 431 - 49 627
Mexico 121 691 363 791 419 956b 8 273 121 557 151 924b
Nicaragua 1 414 4 681 8 919 - 181 494
Panama 6 775 20 742 40 314 - 3 374 4 784
Caribbeana 12 365 47 817 74 160 1 072 3 041 10 222
Anguilla 231b 968b 1 257b 5b 31b 31b
Antigua and Barbuda 619b 2 371b 2 987b 5b 92b 118b
Aruba 1 161 4 567 3 952b 675 682 712b
Bahamas 3 278b 13 438b 19 136b 452b 2 538b 4 026b
Barbados 308 4 240 6 667 41 3 623 4 020
British Virgin Islands 30 313b 264 934b 610 731b 69 818b 376 160b 750 855b
Cayman Islands 25 585b 136 703b 224 728b 20 377b 82 718b 120 950b
Curaçao .. 527 951b .. 32 137b
Dominica 275b 643b 833b 3b 33b 40b
Dominican Republic 1 673 18 906 30 978 68 743 751
/...
Total 287 617 347 094 553 442 328 224 262 517 432 480 721 455 287 617 347 094 553 442 328 224 262 517 432 480 721 455
Primary 51 222 79 751 156 033 46 226 -12 887 36 087 31 550 27 914 46 838 93 254 3 309 -52 580 13 047 2 746
Agriculture, hunting, forestry and fisheries 1 317 5 204 1 813 7 875 2 023 2 096 3 034 1 784 408 366 -1 423 307 -243 6 121
Mining, quarrying and petroleum 49 905 74 546 154 220 38 352 -14 910 33 991 28 516 26 130 46 430 92 888 4 732 -52 887 13 290 -3 375
Manufacturing 79 381 127 775 204 203 134 770 135 454 189 264 388 335 38 142 127 792 222 833 137 818 108 351 199 217 365 734
Food, beverages and tobacco 9 935 38 110 45 335 32 382 54 836 34 567 28 674 -467 33 620 31 541 31 671 40 207 33 873 28 019
Textiles, clothing and leather 269 856 2 740 3 802 5 071 2 314 670 546 2 963 2 449 2 508 1 883 963 -12 315
Wood and wood products 1 561 -2 326 2 406 4 610 1 433 1 656 1 805 1 425 8 388 3 748 3 589 2 754 3 012 2 021
Publishing and printing -22 811 -25 177 25 194 425 30 906 -112 65 61 47 167
Coke, petroleum products and nuclear fuel 2 214 350 -752 -120 -2 227 -6 115 69 -844 -6 802 -2 673 -3 748 -2 049 -13 965 8 621
Chemicals and chemical products 29 584 34 238 78 487 30 801 27 936 82 975 160 528 26 416 46 874 89 702 41 485 35 584 77 253 171 326
Rubber and plastic products 277 5 881 2 241 2 766 489 -3 677 4 798 -285 127 1 367 570 381 2 476 1 694
Non-metallic mineral products 366 3 877 1 520 2 323 8 884 5 746 31 283 -567 5 198 1 663 755 3 622 1 990 25 533
Metals and metal products -677 2 648 7 072 10 788 3 485 5 664 13 242 2 746 5 075 18 375 9 705 234 48 059 10 469
Machinery and equipment 2 232 7 921 14 905 15 121 11 394 12 543 22 627 1 814 5 910 14 564 12 836 7 754 10 512 -2 366
Electrical and electronic equipment 19 457 21 026 29 198 23 334 13 210 25 280 26 306 4 713 11 758 39 440 26 821 13 682 16 421 39 409
Motor vehicles and other transport equipment 11 498 7 504 5 392 2 585 2 282 17 461 19 860 73 6 737 10 899 4 902 1 449 11 809 22 999
Other manufacturing 2 687 6 879 15 685 6 202 8 638 10 656 78 049 2 540 7 040 11 870 6 661 2 788 6 766 70 157
Services 157 014 139 568 193 206 147 228 139 949 207 129 301 570 221 562 172 464 237 355 187 097 206 746 220 216 352 976
Electricity, gas and water 61 632 -3 568 26 820 16 610 15 220 14 465 17 129 44 246 -14 841 6 758 3 128 8 860 17 186 -2 427
Construction 10 513 7 109 1 835 648 1 852 -276 2 228 -2 561 -2 001 -1 575 2 774 4 878 1 067 3 612
Trade 5 555 12 774 19 477 14 711 3 173 37 107 15 433 3 821 6 104 6 412 23 188 5 989 28 637 487
Accommodation and food service activities 930 5 183 4 037 -129 7 405 17 644 7 978 354 867 684 -1 847 898 16 320 2 930
Transportation and storage 5 461 12 455 15 023 19 340 13 429 21 903 33 564 3 651 7 637 6 595 9 129 3 479 9 517 17 163
Information and communication 49 072 20 876 37 432 36 525 27 097 -71 280 18 615 38 880 19 306 22 954 17 417 23 641 -77 435 17 884
Finance 10 326 32 649 38 853 17 116 12 526 91 416 101 772 125 835 138 016 168 033 113 475 131 210 182 389 273 996
Business services 13 587 38 401 43 881 35 976 50 087 83 310 91 830 7 773 16 864 26 423 18 839 27 112 38 450 32 094
Public administration and defense 110 233 604 -97 40 9 98 -594 -4 303 -288 -1 165 -1 984 -5 359 -613
Education 559 2 176 597 524 637 1 259 717 51 310 112 317 -942 128 358
Health and social services 1 111 8 544 3 445 5 444 4 154 3 118 8 051 187 3 815 729 954 2 636 3 021 1 114
Arts, entertainment and recreation -2 084 1 537 1 061 460 2 103 7 675 3 860 -77 635 526 275 647 6 026 6 455
Other service activities 242 1 198 141 99 2 226 779 295 -3 55 -9 615 321 269 -77
Source: ©UNCTAD, cross-border M&A database (www.unctad.org/fdistatistics).
Note: Cross-border M&A sales and purchases are calculated on a net basis as follows: Net cross-border M&A sales by sector/industry = Sales of companies in the industry of the acquired company to foreign MNEs (-) Sales of foreign affiliates in the industry of the acquired company; net
cross-border M&A purchases by sector/industry = Purchases of companies abroad by home-based MNEs, in the industry of the ultimate acquiring company (-) Sales of foreign affiliates of home-based MNEs, in the industry of the ultimate acquiring company. The data cover only those
deals that involved an acquisition of an equity stake of more than 10 per cent.
a
Net sales in the industry of the acquired company.
b
Net purchases by the industry of the ultimate acquiring company.
Annex tables
207
208
Annex table 5. Cross-border M&A deals worth over $3 billion completed in 2015
Shares
Value
Rank Acquired company Host economya Industry of the acquired company Acquiring company Home economya Industry of the acquiring company acquired
($ billion)
(%)
1 68.4 Allergan Inc United States Pharmaceutical preparations Actavis PLC Ireland Pharmaceutical preparations 100
2 42.7 Covidien PLC Ireland Surgical and medical instruments and apparatus Medtronic Inc United States Electromedical and electrotherapeutic apparatus 100
3 20.6 Lafarge SA France Cement, hydraulic Holcim Ltd Switzerland Cement, hydraulic 96
4 20.4 Steinhoff International Holdings Ltd South Africa Metal household furniture Genesis International Holdings NV Netherlands Metal household furniture 100
5 16.9 Sigma-Aldrich Corp United States Chemicals and chemical preparations, nec Merck KGaA Germany Pharmaceutical preparations 100
6 16.0 GlaxoSmithKline PLC United Kingdom Pharmaceutical preparations Novartis AG Switzerland Pharmaceutical preparations 100
Ondereel Ltd, Best-Growth Resources Ltd,
7 14.0 Hong Kong, China Grocery stores China Resources (Holdings) Co Ltd Hong Kong, China Investors, nec 100
Havensbrook Investments Ltd, China Resources
8 12.5 TRW Automotive Holdings Corp United States Motor vehicle parts and accessories ZF Friedrichshafen AG Germany Motor vehicle parts and accessories 100
9 12.0 GE Antares Capital United States Misc business credit CPPIB Credit Investments Inc Canada Investment advice 100
Annex tables
209
Annex table 6. Value of announced greenfield FDI projects, by source/destination, 2009−2015 (Millions of dollars)
Worlda as destination Worlda as investors
Partner region/economy 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
By source By destination
Worlda 958 130 818 974 865 269 631 003 830 771 706 049 765 729 958 130 818 974 865 269 631 003 830 771 706 049 765 729
Developed countries 707 604 593 694 607 184 432 949 547 287 487 287 485 585 321 755 289 803 291 403 238 224 263 256 232 808 261 466
Europe 419 906 359 192 333 938 242 150 303 918 266 289 277 803 198 190 159 186 160 999 139 686 142 567 127 410 152 580
European Union 387 822 328 085 308 536 224 510 273 288 247 544 251 701 192 532 153 068 157 387 136 490 138 516 124 287 149 328
Austria 9 476 8 532 7 740 5 122 6 166 5 087 5 673 1 565 2 070 3 076 1 656 1 172 1 892 1 725
Belgium 8 466 6 190 5 750 3 352 4 639 7 627 5 801 3 684 6 066 2 931 2 726 3 510 5 048 3 715
Bulgaria 25 120 119 83 259 277 306 4 231 3 201 5 313 2 642 1 472 1 299 1 999
Croatia 148 810 83 172 241 113 132 1 550 2 330 2 133 1 067 1 108 923 629
Cyprus 1 127 954 4 517 3 121 1 273 1 120 1 730 237 718 427 130 156 39 388
Czech Republic 1 137 2 640 2 002 2 174 2 438 397 974 3 957 6 214 4 546 3 528 4 330 2 345 3 353
Denmark 9 514 3 739 9 809 7 537 9 481 5 780 13 345 1 625 935 596 934 671 1 077 1 864
Estonia 138 873 387 263 973 164 337 1 150 886 783 892 814 307 518
Finland 3 823 4 300 6 225 6 474 7 608 2 592 4 689 1 191 1 364 1 951 1 884 2 821 1 524 2 093
France 61 743 48 698 43 238 30 512 35 060 48 396 39 600 14 141 8 946 10 493 8 825 11 009 7 526 9 308
Germany 70 008 70 212 68 709 51 872 59 889 53 513 45 937 17 583 15 534 16 027 11 728 12 579 10 135 12 356
Greece 1 715 908 1 064 1 445 845 10 380 183 1 842 1 124 1 979 1 474 3 492 672 212
Hungary 867 320 1 061 877 471 739 319 3 831 7 760 3 469 2 834 2 444 2 816 2 621
Ireland 13 974 3 833 3 939 7 809 4 434 3 026 5 758 4 833 4 000 7 043 4 528 5 148 5 259 5 739
Italy 25 575 19 024 21 433 18 858 26 904 17 897 20 119 10 406 11 442 4 847 3 981 4 435 6 238 6 289
Latvia 674 832 275 85 166 65 298 861 702 606 1 002 735 298 314
Lithuania 321 272 153 603 382 154 730 1 086 1 226 7 355 1 125 820 608 936
Luxembourg 5 276 4 844 8 156 5 713 4 812 6 546 12 071 738 687 303 276 439 193 150
Malta 850 8 540 66 135 127 3 413 312 185 256 199 192 55
Netherlands 33 355 21 007 17 065 9 950 15 524 16 362 10 862 9 528 8 377 5 715 4 012 11 137 6 180 6 233
Poland 1 045 1 851 833 1 353 1 155 1 455 2 095 13 659 11 107 10 819 10 837 9 637 7 549 6 136
Portugal 9 223 5 092 2 032 2 228 3 337 2 781 1 694 5 473 2 756 1 602 1 228 1 732 1 207 2 754
Romania 115 758 104 139 293 548 269 14 403 7 347 11 708 8 885 9 202 5 705 4 515
Slovakia 388 1 311 32 285 271 7 30 3 336 3 867 5 730 1 419 2 137 1 033 3 455
Slovenia 587 529 356 332 162 65 223 289 638 459 455 274 198 151
Spain 40 208 36 871 27 681 18 207 28 579 19 670 23 820 13 044 13 727 9 845 10 318 11 608 10 869 12 593
Sweden 14 593 14 862 13 975 9 025 10 771 7 965 6 586 2 706 2 001 3 010 1 686 1 267 2 347 2 277
United Kingdom 73 454 68 694 61 258 36 855 47 020 34 693 48 117 55 170 27 735 34 436 46 164 34 168 40 807 56 951
Other developed Europe 32 084 31 107 25 402 17 640 30 630 18 744 26 102 5 657 6 118 3 612 3 196 4 051 3 123 3 252
Andorra 31 133 10 168 - - - 31 16 - - 16 - -
Iceland 129 592 316 42 4 231 157 44 - 598 194 124 124 356 300
Liechtenstein 134 93 106 111 54 234 80 - 8 - - 115 76 -
Monaco 28 63 199 - 110 78 99 65 49 113 43 18 25 70
Norway 10 921 5 524 7 046 3 806 3 561 2 727 10 343 2 370 2 280 819 565 1 572 760 540
San Marino - - - 3 - - - - - - - - - -
Switzerland 20 841 24 702 17 727 13 510 22 674 15 548 15 534 3 191 3 167 2 486 2 464 2 206 1 906 2 341
North America 195 980 160 989 179 818 127 930 159 785 151 254 134 405 92 987 83 325 106 492 73 370 91 669 78 964 81 467
Canada 30 013 20 128 26 992 21 394 21 472 27 176 18 531 16 322 19 947 30 198 12 007 19 025 19 234 13 339
Greenland - - - - - - 14 - 412 - - 8 - -
United States 165 967 140 861 152 826 106 536 138 313 124 077 115 860 76 665 62 966 76 294 61 363 72 635 59 730 68 127
Other developed countries 91 718 73 513 93 428 62 870 83 584 69 744 73 378 30 578 47 293 23 913 25 168 29 020 26 434 27 419
Australia 16 887 11 487 13 781 8 751 10 983 11 353 9 866 21 023 41 434 16 172 18 186 14 170 16 081 16 701
Bermuda 7 507 1 250 578 596 1 975 845 4 168 1 162 6 13 4 66 -
Israel 2 643 6 859 3 137 2 706 3 326 2 049 2 254 3 356 874 787 1 452 2 419 389 293
Japan 63 795 52 931 74 790 49 165 64 580 52 301 56 434 5 593 4 458 4 816 4 329 11 157 8 623 8 904
New Zealand 885 986 1 141 1 652 2 719 3 196 657 605 364 2 132 1 189 1 270 1 276 1 522
Developing economiesa 229 977 206 625 244 617 188 261 251 906 212 814 264 823 586 990 482 934 522 796 355 687 534 183 447 951 468 614
Africa 13 235 13 294 32 984 7 151 19 604 13 517 12 548 84 389 70 449 67 551 47 640 68 725 89 134 71 348
North Africa 2 499 1 123 529 2 593 2 645 2 904 5 541 39 321 18 389 11 506 14 987 11 443 26 478 21 866
Algeria 58 - 138 200 15 - 274 2 605 1 367 1 432 2 377 4 285 536 749
Egypt 1 858 1 006 84 2 382 1 155 1 723 1 690 18 474 9 500 5 417 9 475 3 282 18 175 14 636
Libya 22 - - - - 23 12 1 813 973 44 88 135 179 -
Morocco 431 62 103 11 1 247 1 102 3 505 6 840 2 445 2 892 1 485 2 939 5 182 4 513
South Sudan - - - - - - - 58 171 350 341 291 161 -
Sudan - - 187 - - - - 1 889 2 292 72 77 66 68 1 556
Tunisia 130 55 17 - 229 56 58 7 642 1 640 1 300 1 145 446 2 178 411
Other Africa 10 736 12 171 32 455 4 558 16 959 10 614 7 007 45 068 52 060 56 045 32 652 57 282 62 656 49 482
Angola 15 527 - 365 112 345 11 5 806 1 330 383 2 959 829 16 132 2 691
Benin - - - - - - - - 12 46 18 160 11 333
Botswana 12 11 140 66 36 22 57 362 461 378 146 103 236 187
Burkina Faso - - 137 - 22 11 22 270 460 157 1 537 72 -
Burundi - - - 11 11 - - 55 25 42 20 65 367 288
Cabo Verde - - - - - - - - 102 136 58 6 141 277
Cameroon 22 - - - - - 15 1 011 5 287 3 611 565 523 253 1 840
Central African Republic - - - - - - - - 11 - 58 - 22 15
Chad - - - - - - - 57 - 142 102 150 629 8
Comoros - - - - - - - - - 7 130 11 11 11
Congo - - - - - - 32 1 271 - 32 113 3 489 1 708 180
Congo, Democratic Republic of the - 7 - - - 1 - 48 1 060 2 187 466 1 084 540 1 217
Côte d'Ivoire 22 22 - 46 328 150 11 124 281 828 809 2 195 495 3 540
Djibouti - - - - - 600 - 880 891 - 22 179 284 540
Equatorial Guinea - - - - 12 - 8 1 300 10 1 800 3 12 11 160
Ethiopia 11 - - 62 70 - - 337 309 1 115 498 4 929 2 758 1 751
Gabon - - 22 - - 11 11 709 2 493 225 259 48 195 17
Gambia - - - - 865 - - 33 206 15 200 9 - -
Ghana 6 18 54 61 29 - 8 6 790 2 536 5 708 1 250 2 832 4 837 1 436
Guinea - - - - - - - 67 1 417 556 29 482 6 1 005
/…
Source: ©UNCTAD, based on information from the Financial Times Ltd, fDi Markets (www.fDimarkets.com).
a
Excluding the financial centers in the Caribbean (Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, Curaçao, Dominica, Grenada,
Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Sint Maarten and the Turks and Caicos Islands).
b
Least developed countries include Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, the Central African Republic, Chad, the Comoros, the Democratic
Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, the Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, the Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar,
Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, the Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, the Sudan, Timor-Leste,
Togo, Tuvalu, Uganda, the United Republic of Tanzania, Vanuatu, Yemen and Zambia.
c
Landlocked developing countries include Afghanistan, Armenia, Azerbaijan, Bhutan, the Plurinational State of Bolivia, Botswana, Burkina Faso, Burundi, the Central African Republic, Chad,
Ethiopia, Kazakhstan, Kyrgyzstan, the Lao People’s Democratic Republic, Lesotho, the former Yugoslav Republic of Macedonia, Malawi, Mali, the Republic of Moldova, Mongolia, Nepal,
the Niger, Paraguay, Rwanda, South Sudan, Swaziland, Tajikistan, Turkmenistan, Uganda, Uzbekistan, Zambia and Zimbabwe.
d
Small island developing States include Antigua and Barbuda, the Bahamas, Barbados, Cabo Verde, the Comoros, Dominica, Fiji, Grenada, Jamaica, Kiribati, Maldives, the Marshall Islands,
Mauritius, the Federated States of Micronesia, Nauru, Palau, Papua New Guinea, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Sao Tome and Principe,
Seychelles, Solomon Islands, Timor-Leste, Tonga, Trinidad and Tobago, Tuvalu and Vanuatu.
The terms country/economy as used in this Report also refer, as appropriate, to territories
or areas; the designations employed and the presentation of the material do not imply the
expression of any opinion whatsoever on the part of the Secretariat of the United Nations
concerning the legal status of any country, territory, city or area or of its authorities, or
concerning the delimitation of its frontiers or boundaries. In addition, the designations
of country groups are intended solely for statistical or analytical convenience and do not
necessarily express a judgment about the stage of development reached by a particular
country or area in the development process. The major country groupings used in this Report
follow the classification of the United Nations Statistical Office:
• Developed countries: the member countries of the OECD (other than Chile, Mexico, the
Republic of Korea and Turkey), plus the new European Union member countries which are
not OECD members (Bulgaria, Croatia, Cyprus, Latvia, Lithuania, Malta and Romania), plus
Andorra, Bermuda, Liechtenstein, Monaco and San Marino.
• Transition economies: South-East Europe, the Commonwealth of Independent States and
Georgia.
• Developing economies: in general, all economies not specified above. For statistical
purposes, the data for China do not include those for Hong Kong Special Administrative
Region (Hong Kong SAR), Macao Special Administrative Region (Macao SAR) and Taiwan
Province of China.
Methodological details on FDI and MNE statistics can be found on the Report website
(unctad/diae/wir).
Reference to companies and their activities should not be construed as an endorsement by
UNCTAD of those companies or their activities.
The boundaries and names shown and designations used on the maps presented in this
publication do not imply official endorsement or acceptance by the United Nations.
The following symbols have been used in the tables:
• Two dots (..) indicate that data are not available or are not separately reported. Rows
in tables have been omitted in those cases where no data are available for any of the
elements in the row.
• A dash (–) indicates that the item is equal to zero or its value is negligible.
• A blank in a table indicates that the item is not applicable, unless otherwise indicated.
• A slash (/) between dates representing years, e.g., 2010/11, indicates a financial year.
• Use of a dash (–) between dates representing years, e.g., 2010–2011, signifies the full
period involved, including the beginning and end years.
• Reference to “dollars” ($) means United States dollars, unless otherwise indicated.
Annual rates of growth or change, unless otherwise stated, refer to annual compound rates.
Details and percentages in tables do not necessarily add to totals because of rounding.
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